Minimum Wage Law: Get Rid of It

Starting July 24th 2009, 29 states will raise their minimum wage floor from $6.55 to $7.25. That is a 10.7% rise in income for some. But for some, it will mean pink-slip. While jobless rate is rising and pay-cuts are spreading, government best strategy to increase wages is to raise the minimum wage. This is going to put tremendous pressure on corporations which are already facing the biggest headwind since the great depression.

Matt Goldberg, a staff attorney at the Legal Aid Center, stated that "Higher wages increase worker productivity, reduce costly turnover and reduce dependence on government assistance" I reckoned this is true. Instead of higher wages increase worker productivity, it should be productivity that leads to higher wages. In a free market economy, there would not be wage ceiling or floor. Business owners and workers would determine their own wages and costs. I truly believe that minimum wage can make workers less productive. Think about it, why would you work harder if you know that next year, you will receive a raise because the government.

The Fair Labor Standards Act first set a national minimum wage in 1938. It set out to assure "the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers." I believe most efficient way to determine wage is to allow the market to adjust. Minimum wage did not lead to increase in standard of living. Better standard of living came from innovations and productivity gain.

Art

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