The Deceitful and Coercive Nature of Minimum Wage Laws

Minimum wage laws hurt the most vulnerable workers and are backed by violence

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Minimum wage laws dictate the lowest amount of money that an employer can legally pay an employee in exchange for the employee's labor. In other words, governments set the price floor for labor by enacting minimum wage laws.

There is constant disagreement between people on what the minimum wage should be set to - a YouGov study from October 2021 in the United Kingdom highlights the variety of responses about what this figure should be. In fact, the same study claims the following:

Previous YouGov research has shown that simply asking people to write down what they think the minimum wage should be generates incredibly high levels of “don’t know” responses (around 50% of the large majority of Britons who say there should be a minimum wage).

A slightly older YouGov study from July 2021 found that:

When it comes to general support for the minimum wage, support is near universal. Only 5% of Brits oppose the minimum wage policy, with 89% supporting it. Majority support is seen across all political and demographic groups.

Despite the fact that such a large percentage of people support minimum wage laws, I am going to demonstrate below why such laws are both deceitful and coercive in nature. The first argument centers around why the idea that minimum wage laws help the most vulnerable people is completely false, while the second approach exposes the sheer violence that the minimum wage law is reliant on.

The Deceitful Nature

Supporters of the minimum wage tend to frame it as a victory for the working class, since from a simplistic point of view, it should lead to people earning more money than they were before the introduction of the minimum wage, or when the minimum wage was set to a lower price.

This analysis fails to consider how minimum wage laws will affect the least skilled of all workers; that is, the workers at the bottom of the ladder of labor value - the people taking up low-paying jobs which many people would not want to do.

Every worker's labor is worth a certain price, and the higher you raise the minimum wage, the more workers you freeze out of the job market because it is no longer profitable for any firm to hire them. Therefore, the workers who suffer the most when the minimum wage is increased are the workers who lose their jobs or find it very difficult to find a job now that the minimum amount they can legally earn is greater than the value that they can bring to a potential employer through their labor.

As an example, imagine a straightforward and simplistic scenario whereby a man named Aaron owns a company which produces and sells widgets. He sells each widget at $15. Aaron hires a man named Bob to produce widgets and pays him $12 per hour. Due to the fact that Bob is a low-skilled worker, it takes him 1 hour to produce a single widget.

For every widget Aaron sells, he gains a profit of $3. Bob is also profiting from this scenario since he is earning $12 for every hour that he works, whereas he was previously unemployed and therefore not earning any money. Now imagine that the government that rules over Aaron and Bob decides that they want to "protect" vulnerable workers like Bob, so not only do they decide to enforce a minimum wage law, but they also decide that this minimum wage law will state that workers must be paid a minimum of $16 per hour.

Suddenly, Aaron and Bob's mutually beneficial agreement which led to both of them profiting is no longer legal, and assuming that both Aaron and Bob are law-abiding citizens, and that Aaron wants to keep the price of widgets at $15 since he was selling a lot of widgets at that price, he is going to have to fire Bob and replace him with a higher skilled worker who is able to produce more than a single widget per hour.

This simultaneously makes the pool of potential employees that Aaron can hire smaller, while also making the pool of potential employers that Bob can work for smaller, because the price of labor has been artificially increased to $16 per hour even though the true value of Bob's labor is less than $16 per hour. As such, we can infer that less employers will be willing to hire a person (in this case, Bob) whose skills are worth $12 per hour, increasing the probability of Bob not being able to earn any money at all!

On the other hand, Aaron can increase the price of widgets to $19 per hour, for example, and raise Bob's wage from $12 to $16 per hour. As a result, this may lead to Aaron's company being less profitable, assuming that significantly less people purchase the widgets at $19 than at the previous price of $15, leading to a lower revenue and lower profit. Consequently, Aaron ends up earning less money, and Bob's job is less secure because Aaron has less money to invest in his company, increasing the probability of Aaron deciding to invest in a different field of products, which would potentially lead to Bob losing his job.

The Coercive Nature

The above illustration of how minimum wage laws are deceitful since they harm the most vulnerable workers is not the strongest argument against the minimum wage. Although it illustrates that the introduction or increase of a minimum wage will lead to a certain increase in unemployment, it fails to strike the much more deep-rooted issue of the minimum wage: the coercion factor.

Most of the discussion about the minimum wage centers around specific details of how the law should be drafted, such as whether the minimum wage should differ for people based on age, how high it should be in order for people to earn a comfortable wage, and even how much unemployment a drastic increase in the minimum wage could cause.

On the contrary, very little of the discussion is centered around the core of the issue: what right does anybody have to initiate violence against two people based on the fact that the price that they have both consented to for a job is deemed to be too low?

In other words, taking the previous example with Aaron and Bob, what right do people in the government have to force Aaron and Bob to nullify their prior arrangement in which both Aaron and Bob agreed that Bob would trade his labor in return for Aaron's money ($12 per hour)?

Taking the argument to its logical conclusion, if Aaron and Bob decided to ignore the passing of the $16 hour minimum wage law and continue their arrangement, if they were caught by government officials, they would probably firstly be subject to fines, and if they refused to pay these fines, their government-inflicted problems would keep stacking up, and they would eventually be arrested. If they resisted arrest and decided to defend themselves against the police, there is a good chance that the severity and length of their punishment would be increased, and there is a good chance that they would also be killed if they fought back hard enough.

Obviously, it is unlikely that employers and employees caught ignoring the mandated minimum wage would end up in a scenario where they lose their lives as a result of their decision to continue their labor arrangements which do not harm anybody else, but the glaring issue at hand is that every government mandate is backed by the threat of force.

There is no ethical justification for the state to exist, and by extension there is no ethical justification for the state to artificially set the price of labor to a certain value by threatening people with violence if they refuse to arrange agreements about their labor around that value.