Reading @Saifedean Ammous's Principles of Economics.
As a business owner I always knew the minimum wage concept and political position is actually counter-productive to human growth (personal development)
I however hadn’t thought of it in the frame that when a minimum wage is instituted, in effect it becomes illegal to hire people who can’t produce more than the minimum wage.
“Wages, like all prices in a market, are not just arbitrary numbers chosen by greedy employers. They are a reflection of the marginal productivity of the worker. As the law now stipulates that a worker must be paid $10 per hour, the employer now has to reconsider whether it is worth hiring this worker. When the government mandates a minimum wage, it does not magically alter the calculus of the employer, nor does it magically increase the worker’s productivity. The employer will still only hire workers whose productivity is higher than their wage.
Thus, the minimum wage law makes it illegal for employers to hire anyone whose marginal productivity is less than $10 per hour. Any worker whose productivity is less than that will now become a drain on any business that hires him and pays him that amount. Either he gets fired, or the business that hires him loses money and goes bankrupt. In all cases, these jobs are eliminated, and everyone whose productivity is less than $10 per hour is now legally unemployable; either unemployed or employed illegally.”
As a business owner I always knew the minimum wage concept and political position is actually counter-productive to human growth (personal development)
I however hadn’t thought of it in the frame that when a minimum wage is instituted, in effect it becomes illegal to hire people who can’t produce more than the minimum wage.
“Wages, like all prices in a market, are not just arbitrary numbers chosen by greedy employers. They are a reflection of the marginal productivity of the worker. As the law now stipulates that a worker must be paid $10 per hour, the employer now has to reconsider whether it is worth hiring this worker. When the government mandates a minimum wage, it does not magically alter the calculus of the employer, nor does it magically increase the worker’s productivity. The employer will still only hire workers whose productivity is higher than their wage.
Thus, the minimum wage law makes it illegal for employers to hire anyone whose marginal productivity is less than $10 per hour. Any worker whose productivity is less than that will now become a drain on any business that hires him and pays him that amount. Either he gets fired, or the business that hires him loses money and goes bankrupt. In all cases, these jobs are eliminated, and everyone whose productivity is less than $10 per hour is now legally unemployable; either unemployed or employed illegally.”
4
