Minimum Wage
Economic principles dictate that when government imposes a minimum wage
rate above the market wage rate, it creates a surplus “wedge” between
the supply of labor and the demand for labor, leading to an increase in
unemployment. Employers cannot simply begin paying more to workers whose
marginal productivity does not meet or exceed the law-imposed wage. The
only course of action available to the employer is to mechanize operations
or employ a higher-skilled worker whose output meets or exceeds the “minimum
wage.” This, of course, has the advantage of giving the skilled worker
an additional (and government-enforced) advantage over the unskilled worker.
For example, where formerly an employer had the option of hiring three
unskilled workers at $5 per hour or one skilled worker at $16 per hour,
a minimum wage of $6 suddenly leaves the employer only the choice of the
skilled worker at an additional cost of $1 per hour.
Ron Paul, “Minimum Wage Increase Act,” U.S. House of Representatives,
March 9, 2000.