Free market economists and conservative activists point out that minimum wage laws harm the very people they are supposedly intended to help: unskilled workers. A recent article from the conservative Heritage Foundation, for example, makes this point.
The economics is straightforward: Employers are not willing to pay people more than what they are worth to the company. If someone is worth only $5 per hour to a business, the employer will not pay him $7.25 or $10 per hour. The real minimum wage is zero, and that is precisely what many unskilled workers end up getting due to the intrusive wage-control laws.
As an indication of the problems created in part by minimum wage laws, last November the Associated Press reported that 14.3 percent of blacks—and 40.5 percent of black teens—were unemployed.
As significant and as clear as the economic problems caused by minimum wage laws are, however, the economic problems are not the fundamental issue. The economic harms are a consequence of the immorality of the minimum wage laws: The laws violate individuals’ rights to property and contract. Employers have a moral right to run their businesses as they see fit, free from government interference, so long as they do not violate the rights of others by force or fraud. Both employers and prospective employees have a moral right to negotiate their terms of employment, free from government interference. Minimum wage laws violate the rights of both parties.
So long as most Americans believe it is moral for the government to prohibit the free negotiation of wage rates in order to “help” the poor, the economic observation that minimum wage laws throw many low-skilled workers out of a job will not alter the policy. Only when Americans recognize that the minimum wage laws are immoral—immoral because they violate people’s rights—will Americans come to oppose these laws deeply enough to call for their abolition. Only then will justice and economic sanity prevail.