Christianomics: A blog on economics, politics, and law

The minimum wage is in the news again thanks to the Biden administration’s stimulus bill (1). While I’ve already written about the history of the minimum wage and its effects on the poor, I wanted to address the root source of the minimum wage fallacy: Karl Marx’ Labor Theory of Value. To put it simply, the theory says that someone should be compensated based on how hard they work. If you have an easy job and aren’t required to work very hard then you should be paid little. If you have a more difficult job and have to work hard at it, then you should be paid more (2). While this sounds good on its face, this assumption is very dangerous and can lead a country down the path of minimum wage laws, price controls, and government controls of production (socialism). --------------------------------- Meet Dr. Hank, an average (Level 5 out of 10), everyday brain surgeon. He has a good work ethic (8 out of 10) and a positive attitude (7 out of 10). As an average, everyday brain surgeon, Dr. Han...

Simply put, the minimum wage should be 0. And for you Bernie Sanders fans, Denmark, Finland, and Sweden agree with me.  But that didn’t stop Florida from becoming the next state to require a minimum wage of $15. Like all recent increases in the minimum wage this too was touted as, "a huge win for the working people of the Sunshine State!"(1) At first it seems simple. Well-meaning people want to help the poor by forcing businesses to pay them more money. If you look at the economy in a vacuum that would play out. But life is not so simple. The topics of prices and Karl Marx’ defunct Labor Theory of Value are worth spending a whole essay on, but suffice it to say that the price of goods and services are based on how much the customer is willing to spend.(2) And in this particular instance the goods and services are the employee and the customer is actually the business itself. Raising the minimum wage makes the employee more expensive. And when you make something more expensive...