How much is an hour worth? The war over the minimum wage

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Some economists say it should be raised. Others say it’s already too high. But what if both sides are missing the point? By Peter C Baker

No idea in economics provokes more furious argument than the minimum wage. Every time a government debates whether to raise the lowest amount it is legal to pay for an hour of labour, a bitter and emotional battle is sure to follow – rife with charges of ignorance, cruelty and ideological bias. In order to understand this fight, it is necessary to understand that every minimum-wage law is about more than just money. To dictate how much a company must pay its workers is to tinker with the beating heart of the employer-employee relationship, a central component of life under capitalism. This is why the dispute over these laws and their effects – which has raged for decades – is so acrimonious: it is ultimately a clash between competing visions of politics and economics.

In the media, this debate almost always has two clearly defined sides. Those who support minimum-wage increases argue that when businesses are forced to pay a higher rate to workers on the lowest wages, those workers will earn more and have better lives as a result. Opponents of the minimum wage argue that increasing it will actually hurt low-wage workers: when labour becomes more expensive, they insist, businesses will purchase less of it. If minimum wages go up, some workers will lose their jobs, and others will lose hours in jobs they already have. Thanks to government intervention in the market, according to this argument, the workers struggling most will end up struggling even more.

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