Today on ODHAVBLOG, we will investigate the government program of a Minimum Wage that, through manipulation of the economy, seeks to produce a more equitable and compassionate economic climate for low earning workers.

Every economic process, in this case most relevantly the process through which labor is apportioned, is ruled by the law of supply and demand. This much is clear from hundreds of years of theoretical work and empirical evidence. Therefore, we must consider these government programs and their effectiveness within the context of scientific, economically proven truths.

Minimum wage laws seek to establish a baseline for the negotiation of wage rates in every area of employment, and to thereby guarantee the worker a "reasonable" payment for his or her well-being. These laws assess a "minimum" wage rate as the lowest possible wage by which an individual can make a decent living, as determined by legislators.

In our assessment of the matter we cannot, no matter what our compassionate inclinations, let our humanitarian prejudices influence our inclusion of the fundamental and irrefutable laws of economics that market forces follow in spite of any governmental interference. These laws work no matter what programs are established contrary to them, and government programs must be understood within the bounds of these principles.

The law of supply and demand applies to every scarce resource on the market, including labor. Labor is a scarce resource indistinguishable from other resources in its practical market operation because the number of willing and able workers is never adequate to meet the infinite wants and needs of consumers. A minimum wage sets a rate at which every worker is to be payed, and affects the market in the same manner as a law setting a minumum price for any scarce resource. To demonstrate this, we will establish a parallel example involving the sale of vehicles as a reference regarding the action of applicable principles as applied to a scarce resource.

If the government establishes a minimum wage at which workers are to be compensated for their labors, in the short term this law will result in a slight increase of income for those workers previously employed at levels below the determined minimum wage. This increase in income will come into effect so long as employers are unable to instantaneously eliminate inefficient labor. It is fair to assume that such labor will remain on the market for small periods of time, however it must be recognized that natural forces will act quickly to eliminate waste and maximize profits.

If, in our parallel example, the minimum price of cars is established at $500, this mandate will have the immediate effect of an increase in income for used car salesmen, since there will be certain buyers in serious need of transportation with adequate funds that they will consent to purchase at the higher rate, buying vehicles previously only worth less than $500. Those buyers unable to meet the established rate, however, will be unable to purchase vehicles.

The long-term effect of such legislation becomes obvious in our parallel case: the majority of car buyers will refuse to pay $500 for cars naturally worth less than $500, demanding more valuable vehicles, and those buyers unable to afford $500 cars will have no choice but to do without transportation. It is obvious how this hurts the market overall and hurts the well-being of individuals.

In the case of labor, the long term effect is that employers will refuse to pay a minimum wage for labor naturally less than the minimum wage. To do otherwise would be to unnecessarily forfeit profit, and to lose competitive edge against competing producers. Those individuals capable of only occupying jobs that pay less than this minimum wage will find no demand for their labor at the higher rate, and will be unable to find employment. This hurts businesses, just as it hurt anyone in need of a vehicle costing less than $500, and hurts individuals, just as it hurt any individual (or salesman) attempting to sell a less valuable vehicle in the above example. The end result of such legislation is to abolish employment opportunities in which the worker would naturally receive less than the minimum wage. This means nothing less than that for every individual previously employed at sub-minimum wage levels, there will now be an unemployed individual.

Once the implications of such a minimum wage law are thought out to their logical conclusions, it becomes readily evident that this form of attempted market manipulation utterly fails, and succeeds only in harming those for whom it originally set out to provide. Contrary to what proponents of such a system may claim, having a slightly inadequate wage is very much preferable to having no wage at all.

These are the undeniable scientifically proven effects of such a system. Given these facts, no one should defend minimum wage laws as a means of helping the poor; these laws only increase unemployment, hurt market production, and exacerbate the problems of poverty and underemployment.