The increase in the minimum wage is a noble venture. It is, however, not a well

Question

The increase in the minimum wage is a noble venture. It is, however, not a well thought out venture. It is as I have said many times, Keynesians and their followers are not evil people, they simply do not follow ideas to their logical conclusions. They think only of the feel good quality of the offering help. That's all that matters. Not results of their mis-guided actions. Never forget opportunity cost---it is real! Consider what has happened in Seattle because of their $15 an hour pay rate. Business are closing or moving out of the city and into the suburbs. The average minimum wage workers pay has gone down by $125 a week. There is no such thing as a free lunch. Could this happen here?

Explanation / Answer

Increasing minimum wage might sound like a novel action aimed at helping unskilled and low-income workers. However, it will have many unintended consequences. When firms have to pay a higher minimum wage, it reduces the cost of the firms. If the firms pass the increased cost the consumers, the sale will come down and the firm will have to cut production and lay off workers. In addition, firms might go out of business because of the increased cost and this can make many more workers unemployed. Also, the increased cost might force firms to relocate to places where there is no minimum wage law. Such mass exists of firms can increase unemployment rates. As economists say, there is no free lunch and we cannot gain something without a proportionate sacrifice. The minimum wage cannot benefit a group of employees without hurting others.

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