Max­i­miz­ing losses

The Washington Times Daily - - EDITORIAL -

As a macro­eco­nomics stu­dent, I agree with Richard Ber­man (“Min­i­mum wage re­sis­tance,” Web, March 6). The ba­sic idea be­hind the min­i­mum-wage hike is good, but there are dis­ad­van­tages that come with such a law.

It has been ar­gued, for ex­am­ple, that a min­i­mum-wage re­quire­ment raises the equi­lib­rium wage, and hence, leads to in­creased un­em­ploy­ment. There are other im­por­tant ef­fects of a min­i­mum wage law, as Mr. Ber­man men­tions. Em­ploy­ees must bring at least as much value to their com­pa­nies as they are paid, or those com­pa­nies will fail and many jobs will be lost (or never be cre­ated at all). Rais­ing the min­i­mum wage raises the hur­dle a worker must cross to jus­tify be­ing hired.

There is a skill gap to­day, and higher wages re­quire work­ers to have more skills. Up­ping the min­i­mum wage in­creases the like­li­hood of jobs be­ing lost in small busi­nesses, re­tail es­tab­lish­ments, restau­rants and fast­food chains. We can turn to the law of de­mand for bet­ter un­der­stand­ing. The higher the price, the lower the de­mand — and this ex­tends to the price of la­bor. Busi­nesses can’t pay work­ers more than the value those work­ers bring to the ta­ble. (Higher wages will also lead to more ex­pen­sive goods.)

MIKAELA WILJE Ed­mond, Okla.

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