Minimum wage laws can lead to unemployment from "summary" of Basic Economics by Thomas Sowell
Minimum wage laws, like other price controls, can lead to unintended consequences. When the government imposes a minimum wage that is above the level that would be set by supply and demand in a free market, it creates a situation where there is a surplus of labor. In other words, there are more people willing to work at the minimum wage than there are employers willing to hire at that wage. This surplus of labor leads to unemployment, as some workers are unable to find jobs at the mandated minimum wage. Employers are reluctant to hire workers at a wage that exceeds their productivity, as they would operate at a loss. As a result, some workers, particularly low-skilled and inexperienced workers, may find themselves priced out of the labor market because of the minimum wage law. Moreover, the negative effects of minimum wage laws are not limited to just unemployment. Employers may also respond to higher labor costs by cutting back on other employee benefits, reducing work hours, or increasing prices for consumers. In this way, minimum wage laws can have ripple effects throughout the economy, impacting both workers and consumers. Proponents of minimum wage laws argue that they are necessary to ensure fair wages for workers and reduce poverty. However, economics teaches us that artificially setting wages above market levels can distort the allocation of resources and create inefficiencies. While it may benefit some workers who are able to secure jobs at the higher wage, it comes at the expense of others who lose job opportunities.- While the intentions behind minimum wage laws may be noble, it is essential to consider the unintended consequences that they can have on the economy. By distorting the labor market and leading to unemployment, minimum wage laws can create more harm than good for both workers and businesses.
