I was just reading more about about the economics behind minimum wage laws, and came across something interesting about their theoretical effects vs. their empirical effects. As a logical necessity, raising the minimum wage will result in unemployment. This is one of the most basic and self-evident of economic truths -- when the price of a good or service increases, fewer people will purchase that good or service, since people have limited funds and are more likely to purchase cheaper goods. In this sense, labor is theoretically exactly the same as any other good or service (labor is merely providing a service for an employer). Obviously if candy bars were suddenly $5 each by law, fewer people would buy candy bars. If they were $1 by law, more people would buy them than if they were $5, but still fewer than if they cost their natural price. So it is also with minimum wages.

The odd thing is that there is a good deal of reasonable debate about whether or not the empirical findings actually match this obvious theoretical truth. There have been studies that showed increases in unemployment with minimum wage laws, and there are studies that show decreases or no change at all. It is possible that increases in unemployment happen over long time periods, and are therefore harder to study. It is also possible that the natural complexity of the market makes changes hard to detect. It is also possible that there is some unidentified factor which counters the theoretical effects of such laws.

The one thing that should be disturbing to everyone, however, is that most voters and lawmakers do not consider the economic effects of these laws -- they think of it as an obvious solution to poverty with no unintended consequences. The reasoning is that the problem is lack of money, so if the government makes employers give more money to workers, everything will operate smoothly and people will be better off. Like so many government policies, the analysis does not seem to go past the "common sense" answers which are often flat-out wrong. An example of this is the millions of dollars of aid sent by our government to poor African nations. It seems obvious that people are poor, so send them food and money. The problem is that the influx of free food from America and other nations undercuts the market for local farmers, who cannot compete to stay in business. This prevents any kind of economic development that could help Africans permanently better their situation, and makes them permanently dependent on constant aid just to maintain their terrible living conditions. This unintended consequence is well documented and accords perfectly with economic principles, but for some reason virtually no one I've ever talked to had heard of anything like it. Frustratingly, it seems like politicians will continue to do what makes them look good, not what is actually good for people.

Here are some links about minimum wage laws and the African situation:
"For God's Sake, Please Stop the Aid!", with James Shikwati
Outlawing Jobs, the Minimum Wage, by Murray Rothbard
The Impact of the Minimum Wage, by Jared Bernstein and John Schmitt
The Minimum Wage, at The Filter (the parts from Marginal Revolution about women and minimum wage laws are somewhat questionable, but everything else is pretty good)