Could someone help explain why a minimum wage exists? I would be hard-pressed to find a job paying less than $15 an hour these days, which is double the minimum wage. Seems like the free market is doing its job?
My understanding is that it is an attempt to balance power between very low skill laborers who have virtually no bargaining power and the businesses that employ them and could attempt to push wages down even farther.
Imagine a small town where people basically either work for the coal mine or the Walmart. The coal mine can't employ everyone, so for everyone else they have to work at Walmart and at whatever terms Walmart dictates. Minimum wage provides a floor on how bad the terms Walmart offers are.
It's also intended to prevent having people who work but can't afford to live (their labor being effectively subsidized by the state in the form of welfare). There's a lively discourse around whether it's effective at that.
You are correct that in some economic circumstances and some levels of minimum wage, prevailing wages will be higher. I think one could argue that if prevailing wages rise above minimum wage, it's a signal that low skill laborers have some level of bargaining power through high demand or unions.
Some states do have a minimum wage around $15/hr, though. Anecdotally, I'm seeing the same as you near me. The prevailing minimum wage seems to be between $15 and $20 an hour; that's what the chain restaurants and groceries around me are offering.
That will likely crash at some point as market conditions change (maybe robots take over, maybe age demographics change, who knows) and minimum wage should be there to be a stopgap on how far those wages can fall.
Given your small town example, it makes it seem like if we are going to have a minimum wage, it should be legislated lower than the Federal Government. As you said, states are moving past the federal minimum wage already, and it is seemingly successful.
It makes some degree of sense for the federal government to have a minimum wage because they have welfare programs. I don't think it's desirable to allow companies to pay wages low enough that the employees qualify for federal welfare.
> As you said, states are moving past the federal minimum wage already, and it is seemingly successful.
Sure, that's basically the current system. The federal government sets an absolute minimum wage, states can set a higher (but now lower) minimum wage, and in some circumstances, cities can set a minimum wage higher than the state.
It works well in concept. I don't think we're great at adjusting the federal minimum wage for states that don't set their own, but that's more a reflection of stagnation in the political system as a whole than an indictment of the minimum wage system.
> In 2022, 78.7 million workers age 16 and older in the United States were paid at hourly rates, representing 55.6 percent of all wage and salary workers. Among those paid by the hour, 141,000 workers earned exactly the prevailing federal minimum wage of $7.25 per hour. About 882,000 workers had wages below the federal minimum. Together, these 1.0 million workers with wages at or below the federal minimum made up 1.3 percent of all hourly paid workers, little changed from 2021. This remains well below the percentage of 13.4 recorded in 1979, when data were first collected on a regular basis. (See table 10.)
It has gotten significantly better, but it's still easy to forget about the other 1%.
Sure, these kind of regulations feel unnecessary at times of high level of employment. But sooner or later there will be another economic downturn and a lot of people out of work.
