One of the classic debates Americans have been consistently having for the past 30 years has been the advancement and growth of minimum wages.
President Obama recently called for a raise in the federal minimum wage from $7.25 to $10.10.
The call to raise wages comes at a controversial time as the United States has just recovered from the greatest financial meltdown in history, followed by bankruptcies in its once overpaid auto industries, but all of this still isn’t uncommon.
So what’s the problem with a little increase?
The problem with altering minimum wages is the impact it has on natural markets and the demand for certain wages.
If a car wash attendant is only worth $5/hour, then why should he be forced to get at least $7.95?
As a result, the excess resources [money] are expended for non-value added services that present no real market value to society.
In other words, the extra $2.95 isn’t creating any more benefit to the customers.
These non-value added services start off by decreasing margins for businesses, increasing prices for customers, and creating more obstacles for businesses to advance.
Furthermore, the actual advancement of these wages could result in less spending.
If you decided to opt out of washing your car due to the increased price, then what will the car wash attendant do for a living?
Naturally, most college students support increasing minimum wages. Some may even graduate just to get a degree that pays a minimum wage.
Yet, the actual existence of a wage floor works against the incentives to attend a university.
Students have less incentive to attend four year colleges and gain degrees if their non-college graduate counterparts can work in factories or assembly lines for near similar wages without the additional burden of debt that follows.
In the end, it’s not all about financial reward, either.
An academic institution has the ability to create a vast amount of intrinsic value into its students.
In order to spotlight the value on these skills and appeal to incoming students, price floors like minimum wages should be removed as they ultimately destroy the value attained at an academic institution.
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