However, when the price of unskilled labour is raised beyond its productive value to employers, then unemployment does significantly increase in the unskilled labour market. It is state-set minimum wages that causes unemployment.
Constant unpredictable costing simply isn’t desirable, is not cost-effective and can seriously harm smaller businesses. Bigger businesses simply just remove that bottom rung, that entry level opportunity for unskilled workers, making it even tougher for them to find employment, by replacing them with machines that won’t have constantly unpredictable production costs.
So, if you really want to help the poor, and/or low or unskilled workers, why would you want to take one of the very few options that they have in the beginning away from them? By the state enforcing minimum wage laws, it makes it illegal for employers to buy unskilled labour at its true market value, instead forcing them to pay artificially high prices that are not always cost-effective production wise.
This then results in the exact issues outlined above. That one opportunity to get on the ladder, that entry level job where you can at least get a start, and perhaps eventually progress, gets priced out of the market. This is not theory, but fact. Just read any economics book with a historical perspective on employment.
And WHY should an employer be forced to pay for something more than its value? They are simply paying for a service, at the price the market dictates. Do you go into a supermarket and pay over the marked-up price of a product? Would you pay £5 for a £2 bunch of bananas? No? A transaction will only be made on the perceived market value of the goods or services involved.
A prospective employee’s financial situation is nothing to do with the employer. In fact, the employer is the one giving them the opportunity of employment, so why should the employer be forced by the state to meet the burden of their financial difficulties?
It is not a case of being heartless, it’s just looking at it fairly. An employer is simply engaging in one half of a transaction, just like anybody else, so why would it be “fair” to legally cheat him by forcing him to pay over the market value for the service he is buying?
Not only is this unjust and unfair on the employer (though years of social engineering has created some sort of “moral code” where society thinks it’s acceptable to ignore the employer’s right to fairness), and not only does it limit or deny those employment opportunities spoken about earlier, but it diminishes the incentive for low or unskilled workers to INCREASE their value to employers.
If £6 an hour is not enough for their needs, why work harder to prove themselves worthy of more, when they can now earn £10 an hour despite still only providing £6 worth of productive labour? Why bother to improve their skill-set and work their way up?
The incentive for improvement and increasing one’s value becomes less important, whilst employers only see financial liabilities rather than assets when being forced to pay higher than market value labour prices and there you go, welcome to higher unemployment.