A perfect market scenario only works when both parties are equally informed, and when neither party has some kind of unfair advantage over the other. Let’s not pretend that employers and workers are on an equal footing. A worker, particularly an uneducated one, often doesn’t know the fair market value of his skills. Even if he knows what he’s worth, he can’t always take advantage of that, because he is geographically limited. Especially in a city where there are only one or two major employers, the employers can collude to drive down wages well below the average market value. Sure, workers could get better wages elsewhere, but they’d have to move to those other places.

What I’m getting at is that employers often have two advantages over workers: better knowledge, and geographical monopoly power. That’s not a recipe for a well-functioning free market. Maybe minimum wages have their place. (Although it would probably be better to establish minimum wages based on education or skills, rather than one blanket minimum wage.)

His lack of knowledge is a market phenomenon. Any price (labor or otherwise) isn’t determined because both parties have perfect knowledge. In fact, this is why the market has supported education - especially business-type education, which improves people’s ability to negotiate and demand a higher wage. The wage price is the best that each party can do - both the employer and the employee have equally fair shots to educate themselves to earn a better price. The place in-between that, where a lower wage will cause a move, and a higher wage will lose money, in a very natural (and I would argue “fair”) place for a wage to rest.

The geographic limitation of workers is, again, a natural phenomenon. To artificially floor the wage to “compensate” for this takes away a legitimate market advantage that local employers have. Besides, it is in these employers best interest to keep the geographic disparity (but it should cost something just like any convenience) low because they face competition from larger firms who will pay for good employees to move.

The point is that, of course, there are other factors pushing the wage down, but we have to remember that geography and knowledge work both ways. Most people feel they benefit from a $4 pay raise, they may have been worth $10 more, but rather than spend all the time and work to educate themselves, they’ll give the $6 to their employer and keep the $4 and be perfectly benefited. Also, at some point an employee talks to someone four states over and sees that he’s making twice the money he is for the same job. If a local employer tries to negotiate the price too low then he must face the threat of moving.

Remember local markets aren’t in a vacuum.

Although it would probably be better to establish minimum wages based on education or skills

How is this even feasible? Does a government agency need to be created to certify all the minutia of skills and abilities? Why would any non-market mechanism need to do this when a price does it already?

Yes, but how long does that take? If a local employer forces the wages down to rock bottom, eventually people will move, and the market forces will cause the employer to raise wages. How long does that process take? A year? Five years? Ten? That’s neither efficient nor humane. Maybe we can do better by using laws to avoid the whole messy process completely.

Maybe we could add to that mix experience and attitude.

I like the idea of no or low minimum wage for 13-17 year olds(while limiting the number of hours allowed to work). If employers representing non-skilled labor were allowed to hire teenagers for cheap, it might provide more opportunities for many kids to develop a decent work ethic, to help them to understand the relationship between money and time, and it might give them something useful to do during the summer. I’m thinking the good from this scheme is almost all in the area of getting experience and very little in the area of getting money–but they are, after all, still supported by their parents.

Some kids go through high school and college and then graduate and have never had any kind of job. They are educated and maybe even skilled, but inexperienced. Then they can’t find a job because they have no experience and employers won’t hire them for unskilled jobs because they are “overqualified.”

OK, Colin, if that comment was too emotional, immoral or unfair, then just cut and paste it into tomorrow’s comments!

But that process is not good for the employer either. Most employees won’t stand not gradually making more money, let alone cuts in their wages. The place would have a strike on their hand or worse. Maybe the second or third in command takes his knowledge and starts a different company doing the same thing, knowing that he can get profit and pay wages only slightly higher than the latest drop by the local employer.

If the employer is even remotely smart, he isn’t going to risk this at all, especially when he’s making a good profit already. The risk of alienating employees/strikes/defections are far to great to just start “forcing” wages down.

The “messy process” is already avoided by market mechanisms and the risk inherent in the process. It is in both parties best interest to preserve a cooperative environment.

Some kids go through high school and college and then graduate and have never had any kind of job. They are educated and maybe even skilled, but inexperienced. Then they can’t find a job because they have no experience and employers won’t hire them for unskilled jobs because they are “overqualified.”

You have partly touched on what I am working on for tomorrow. The reason these kids can’t find a job (and also the reason many areas have exceptions to minimum wage for teens) is because they aren’t worth minimum wage. They have no training, experience or education. Teenagers were one of the early casualties of minimum wage. We’ll talk about this tomorrow with the “high jump bar” effect that increasing minimum wages does.

So I agree with you entirely - these kids need on-the-job training, experience and skills - and they are being robbed of that by the minimum wage.

“Some kids go through high school and college and then graduate and have never had any kind of job. They are educated and maybe even skilled, but inexperienced. Then they can’t find a job because they have no experience and employers won’t hire them for unskilled jobs because they are “overqualified.””

My friend the Pizza Hut manager said that places like his were afraid to hire people with degrees because they don’t think they will stay for long.