Minimum wage and the fallacy of central planning by government

Anybody who thinks raising the minimum wage will help the American worker is ignorant of basic economics: “the higher the price of good (labor), the less people (businesses) will demand of that good (labor).”

History is rife with governmental attempts to artificially control markets, be it either wage or prices — generally with disastrous results. Government artificially imposing a minimum wage has the effect of sawing out the bottom rungs of the economic ladder for the lowest-skilled worker as the higher-wage business will insist on more experience and productivity than the entry level (bottom rung) worker can provide.

The second economic law that comes into effect when wages are artificially raised by government is substitution.

Businesses will substitute capital (machinery) for labor. This can be seen as parking lots become self-serve only as government-mandated wages and benefits make human labor too expensive for this mundane task.

The same has happened in automotive manufacturing (robots replacing assembly line workers costing too much per hour for wages and benefits). Next will be hamburger cooks (replaced by automatic hamburger machines), and waiters and bartenders replaced by iPads on the table and automatic drink-mixing machines (they already have automatic bartenders on cruise ships).

If the $12 to $15 minimum wage is enacted, full-service restaurants will become exclusive to the wealthy, and you will be telling your grandkids that “when I was younger, people used to take our order and bring it to the table.” Thank God we have politicians in Idaho with enough business sense to comprehend the devastating long-term effects to workers and business when government artificially sets wages.

The opposite side of the coin is price controls — ask the people of Venezuela how that is working out.

When socialism fails, governments will then try to appease the suffering masses by putting a lid on prices, only to find out that no one will supply the products at the government’s artificially contrived price. Free markets are the only path to prosperity — history has shown us that time and time again. I would challenge anyone who does not believe this to show an example where central control by government has worked out in the long term better than free markets. There are none.

This story was originally published March 29, 2016 at 5:27 PM with the headline "Minimum wage and the fallacy of central planning by government."