The victims of minimum wage laws by Andrea Dantzer

In a repressed or depressed economy, people often clamor for the federal government to increase minimum wage laws as a way to combat poverty and help struggling individuals. However a noble plight this may be, it is actually counterproductive to the end result they wish to see. Minimum wage hurts poor or unskilled workers, small businesses and minorities, costs jobs and raises prices of goods or services while helping union members and encouraging illegal immigration.

Victim Number One: Poor or Unskilled Workers

While on the surface, minimum wage laws or increasing minimum wages from a federal level seems like it would be a benefit to workers and society as a whole, the opposite is true. The University of California in Irvine conducted research focused on how minimum wages and any increases affected workers with little to no skill. The study found that minimum wage laws and their hikes clearly and significantly reduced employment for unskilled laborers. For every ten percent minimum wage increased, employment for the unskilled worker was reduced by 8.8 percent. The bottom line, in a tough economy with an even tougher job market, a job at fair market value is much more beneficial to the low wage worker than no job at all under minimum wage laws.

A fifty year study conducted by the Joint Economic Committee of the US Congress also found that minimum wages:
• Do nothing to reduce or alleviate poverty
• Hurt the poor the most
• Hurt the low wage worker
• Hurt minorities
• Reduce employment opportunities for teenagers
• Reduce employment the most for young black males
• Reduce overall employment

Victim Number Two: Small Businesses

When small businesses are mandated to raise their employment wages to the federal minimum level they are forced into a choice of raising the price of their goods or services and maintaining their same staff or keep their prices the same and fire select workers. Either choice ultimately damages the economy, leads to higher prices and raises unemployment rates. If they choose to raise their prices, the cost is passed on to the consumer which leaves them paying the higher price and having to relinquish more of their paycheck for the same product or service as before. If they choose to keep their prices the same, then they have to let some of their employees go or reduce their hours in order to afford the price increase. While minimum wage laws lead to a few people earning ‘decent’ wages, they also lead to several people having no job at all. The fewer people who have a job, the fewer people can buy the goods and services offered by these small businesses. This increases the supply, but not the demand which further damages a weak economy. Small businesses employ over fifty percent of the working class, so it is not too hard to see how minimum wage laws hurt the small business sector of the American economy and cause unemployment to rise.

Victim Number Three: Non-Union Workers

Having or increasing federally mandated minimum wages hurt the non-union laborer and benefits union workers who earn well above the minimum wage. Labor unions are amongst the biggest lobbyists for and supporters of minimum wage laws. As much as they would like to claim this to be an altruistic gesture, the truth is it helps their members. A higher minimum wage raises the cost for an unskilled worker. Employers are not going to pay the costs if they feel the employee is unskilled or not worth paying for the job being performed. Skilled workers then become more appealing to an employer. When minimum wage is increased union workers wages raise an average of twenty to forty percent when competing against a non-union worker. Minimum wage laws also leave the unskilled worker with fewer job opportunities and reduced working hours or no job at all. Wages may go up, but only for those fortunate enough to keep their job.

Victim Number Four: American Citizens

Minimum wage laws are not only ineffective, but they encourage illegal immigration. If an employer or small business owner has a job they believe is worth $5 an hour, but the government mandates they pay $7 or higher, than they have an incentive to hire an illegal immigrant who is willing to accept $3 an hour. It is not about Americans not wanting to do certain menial jobs; that is the way it should be in a strong free market economy. There are too many regulations imposed on today’s small businesses. The more regulations placed on a business, the higher the cost will be from production to maintenance to employee or labor cost. When a small business has the choice to choose between an illegal immigrant they can afford and the chance to stay in business versus following government mandates for labor costs and going out of business, they are going to choose hiring someone under the table nearly every time. The small business loses and the American citizen looses. An out of work laborer would be in much better shape with a $5 an hour job rather than no job at all. However low that may seem, the less regulations there are and the better chance a small business can make a profit. The employee wage begins to be another competitive commodity and their wage will be increased naturally as the free market sets the value for labor. The incentive for illegal immigrants to seek a job here would also be reduced as there would be fewer job openings available. Without the demand, there is no reason for the supply.

Victim Number Five: Teenagers

Before minimum wage laws took effect, it wasn’t unusual to see a teenager working alongside his parents, at the local store or at various businesses. In 1994 more than half of the teenagers 16and older held a summer job, contrast that to 2010 to barely a quarter of teenagers in the same age group with a summer job. Teenagers learned valuable work ethic and work skills that would carry through to their adult lives. They learned independence as they learned the value of making their own money. Most teenagers do not have a rent or mortgage to pay or grocery or utility bills due every month and can afford to accept jobs that pay below minimum wage. Minimum wage laws have closed this door of opportunity for many teenagers and most low paying jobs now go to illegal immigrants. In 2007 when Congress pushed minimum wage laws from $5.25 to $7.25 over a three year period, unemployment for teenagers aged 16-19 went from 14.8 percent in the beginning of the year to 27.1 percent as the final stages of the law were passed. The only way an employer can afford to pay wages is if the person has the skills to justify the cost. Most young workers are relatively unskilled, so most employers cannot afford to pay to train them when there are plenty of applicants that do possess skills are so readily available. Minimum wage laws hurt young and unskilled workers that need a foot in the door more than they need what the federal government deems a fair wage.

The free market has an alternative and practical solution for every economic issue, if it would be given the chance. Minimum wage laws claim many victims, including the economy overall. They hurt poor and unskilled laborers, non-union workers and the American citizen while union members and big corporations enjoy the profits all the way to the bank.

Property Rights Must Be Protected for Prosperity by Andrea Dantzer

If people do not have well-protected and well-established property rights, the free market cannot work effectively or efficiently. People have much more of an incentive for corruption and stealing when property rights, as a whole, are ignored or stripped away. There is also less of an incentive to invest in capital. Economic growth will invariably falter without investment and natural competition. When individuals have more of an interest in diverting their resources into protecting or fighting for their basic and inalienable rights, the free market will suffer. Property rights are the basis for which all other rights spring and are essential to the free market society.

Investors will not have confidence in an economy that does not have property rights protected. Property rights are the most important factor in the behavior of the economy and thus prosperity. In the free market, there are two essential elements – the first being protection from unlawful seizure and confiscation of property from the government and the second is institutions that facilitate contracts. Private contracts between consensual citizens are integral for growth and prosperity in a free market. We are seeing expropriation by our corrupt government becoming an increasingly common event. From the raid of the Gibson Guitar Corporation, raids on the Amish over raw milk, the harassment and raids waged on health food companies and community picnics having their food bleached and destroyed, the government has disregarded property rights in favor of  corporate interests, rules and regulations and passed in secrecy for too long.

Individuals profit from the protection of property rights in both human and physical capital. If a contract is weak or flawed, individuals can take the necessary steps to rectify the clause or choose to end it at an appropriate time. However, there is no protection when a government usurps the private property rights of an individual – except to stop investing. This stifles the economy, feeds the power of the government and creates an environment of suppression and poverty. Investments are vital for prosperity and growth which eventually leads to higher standard of living overall.

Christians and right-wing Conservatives were vocally outraged when an Islamic group wanted to open a Mosque near the Twin Towers after 9/11; this was coined as the Ground Zero Mosque although the property was not at or on Ground Zero. The right-wing had the perfect opportunity to support and protect property rights, but they failed to see the bigger picture and now they are seeing the other side of the coin as the government is starting to come into churches, libraries and other organizations and dictating what they must do on and with their private property.

Property rights must be protected from the government at all cost, no matter what the circumstances are or if you personally agree with what is being conducted on the private property, or not. As long as it is not hurting or usurping the rights of others, property rights must be protected. 

Once you begin to understand property rights are the basis for all other inalienable human rights, you begin to understand their importance. If you do not want your rights stripped away or trampled upon, you must fight for these same rights, even if you disagree with the principle behind the other party’s actions.

Capitalism is the Entrepreneur's Best Friend by Andrea Dantzer

Andrea Dantzer

3-6-2012

You hear the term capitalism thrown around often these days, but few people really understand what capitalism is and what it entails. The term capitalism was popularized by Karl Marx, in his book, The Communist Manifesto. Marx used it as a word to describe private ownership and a free market. Although Marx decried it, the term defines individual economic freedom. In a broader approach, it is the free market economy.

Capitalism is often confused with crony capitalism, or what is often referred to as corporatism. Corporatism cannot exist without special interest groups and big government. The bigger the government is, the bigger and more powerful corporations are. Entrepreneurs cannot thrive under corporatism. An entrepreneur comes up with a new invention or idea to fill a demand in the market, and they also assume the risks involved with their business venture. When corporations are bolstered by special interest and lobbyist dollars, the market is stifled and competition is eliminated. Entrepreneurs need competition in order to fill the need of the market place with a good or service and at a price the consumer is willing to pay. Capitalism fills the need of the entrepreneur and the entrepreneur fills the need of society.

The risk-reward system of capitalism is often denounced, however, the free market offers true protection from greedy corporatist and unscrupulous companies. In a limited government, corporations enjoy no special status and are forced to compete with the free market. Entrepreneurs then have a chance at succeeding. Failing is also an integral part of the free market society. Companies that are not filling the need of the marketplace are forced to bring their prices down to what the consumer is willing to pay or go out of business. A society with the mindset that some corporations are too big to fail is in deep trouble as they are manufacturing success rather than allowing it to happen naturally.

Entrepreneurs would also have a choice in how to obtain their business working capital to fund their venture, rather than having stifling and stringent regulations obstructing their path. The free market allows them to absorb risks while the free market provides the incentive of making a profit. Business working capital is essential for an entrepreneur to take the risks necessary in order to gain the reward.

A market system that allows the individual to make decisions regarding the best use of its economic resources is always better and garnishes better results than a government making those decisions and controlling the marketplace. 

Andrea Dantzer is an advocate for the return of our Constitutional Republic and is on a self described quest to educate Americans on the issues of free markets, non interventionist foreign policy, and civil liberties. Andrea is a home-schooling mother of three who enjoys being active in the home-schooling revolution and reading www.mises.org daily. She can be contacted at AndreaDantzer@yahoo.com.

See also: Ron Paul and The Cuban Missile Crisis