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Arguments Against Minimum Wage Legislation

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Arguments against the minimum wage legislation

Business and Society Review (118:4) States that the adverse effects of the minimum wage laws illustrates how a government policy that was originally intended to help the people worst off in society can have detrimental effects. By prohibiting employers to pay unskilled workers wages equal to their level of output in terms of productivity, it prompts unemployment for all workers whose level of productivity are below the minimum wage.

According to ambassadors of the minimum wage law, it is unfair to pay employees wages that aren’t adequate to cover the cost of living and therefore this law prevents that act. This goal might be honourable, there are many arguments against the minimum wage controversy. …show more content…

The minimum wage law is thus causing unemployment to be greater than it would be in a free market. Hiring an employee for a wage that is less than their level of marginal productivity will most certainly have a large negative effect on a business’ productivity. The minimum wage legislation is thus making it impossible to hire unskilled employees without negatively influencing economic profitability.

The laws involving the minimum wage controversy does not create economic justice at all. The only effect that these laws have is that they make labour much more expensive than it should be. This motivates businesses to outsource labour to countries where these labour laws are not applicable and labour prices are determined by the level of productivity. Tier (2011) also states that if there are no minimum wage laws employees will have a better level of job security because of the security provided by the market.

A substantial portion of the labour force is made up of teenagers. A study conducted by Neumark & Wascher (1992) concluded that minimum wage laws are increasing the possibility of teenagers dropping out of school to become employees or to work more

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