minimum wage laws -
July 6th, 2011
In any market, whether it is the bond market, the commodities market, the houseing market, the labor market, or the super market, the voluntary exchange between two individuals requires that each participant value the good, service, or medium of exchange of their trading partner higher than the good, service, or medium of exchange that they are oftering their trading partner. In otherwords, if I did not value what you are offering me higher than what I am offering you, no exchange would occur. However, if I value what you are offering to exchange higher than what I am offering to exchange, and if you value what I am offering to exchange higher than what you are offering to exchange, we can trade to our mutual benefit.
This rate of exchange that occurs when two individuals find mutual advantage to a voluntary exchange is the market rate.
In the labor market, their is a voluntary exchange rate that exists between the employer and the employee. The employer may value the labor of a particular individual at $5.00 per hour, whereas the laborer may value his labor at $4.50 per hour. This puts the market rate at anywhere between $4.50-$5.00 per hour. However, the minimum wage rate for any type of service that falls under the minimum wage law is $6.55 an hour. Despite the fact that this particular laborer values his time and effort at $4.50 an hour, to hire at that rate, the market rate, makes the employer a criminal because paying, that is, valuing labor at any amount lower than the minimum wage rate of $6.55 per hour is illegal.