Thursday, January 29, 2009

Minumum Wage = Price Fixing

Minimum wage is price fixing. This price fixing hurts the American ecomony by preventing the meeting of supply to demand.

Protenctionist employment policies also hurt America. The demand that Mexicans exhibit for American jobs indicates a disequilibrim. 

In other words, Amarican un-skilled labor is over-priced. Minimum wage and closing the labor market to foreign competition artificially keep these prices to high. 

Here are the consequences:

1. Outsourcing: Many are moving their factories and services off-shore. This reduces demand for labor and makes the American economy less efficient.

2. High cost of living: Because unskilled labor is expensive, living in America is expensive. In the end, the high minimum wage is self perpetuating. If it were eliminated, the cost of living would go down, making the lower wage suitable.

In order for the labor market to be flexible and competitive, it needs to have artificial protection and price fixing removed from it.

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