Simon’s news at the factory. If you ask him, he’ll tell you a lousy job. He has to sweep up and carries things around. He only earns $3 an hour. Even so, Simon prefers working here to the alternative he see around right now. The wage is just low. Simon appreciates the independent to get him. Next week, he’ll learn how to use the forming machine. That will make thing is more interesting. That’s Edgar, the owner of the factory. The only thing he really cares about is making profit. Edgar would prefer to pay for his worker a tiny fraction of their wage to keep more money for himself, but he knows that wouldn’t work. Edgar is in competition with many business owner. They all need the steady supply of human labor. When deciding whether or not to trade with the employer. Was I can said the wage, but also working conditions and other benefits. If Edgar’s office’s on track to enough, workers want to sell him the labor he need to run his factory, So reluctantly, Edgar ends up pay market prices for the labor he buys. And another part of town, there is the celebration. This group sends to citizen just go to minimum wage low part, they will pull the employer like Edgar to get away from paying a little for worker like Simon. The new minimum wage is $9 an hour. Unfortunately, it doesn’t mean that everyone in the town earn $9 or more. We’re already sure how is existence of competing by of labor. In fluently a lower limit, Edgar will get away of paying his workers, the implement. Edgar will pay for any worker their amount of their revenue, He expects that worker’s labor will create for him with experience. In the other word, employer was known pay for worker more than their income generate they’ll be loosing money if they did that. So what does the introduction of the minimum wage law means for the worker work as Edgar’s factory Vicky’s work generates $23 an hour for Edgar and her wage is $15 an hour. For every hour Vicky works for Edgar, he left with an extra $8 after he pays her wage. Because Vicky’s wage is higher than $9, the new law doesn’t effect her directly. Bob’s labor at the factory generates $10 an hour for Edgar and his wage is $8 an hour. After paying Bob’s wage, Edgar will left with an extra $2 for every hour Bob’s work, But because Bob’s wage is less than legal wage minimum, if Edgar wants to keep him on, he have to pay him more, Edgar calculates as if he raises Bob’s wage to the new minimum of $9, he still be gaining extra $1 for every hour of Bob’s labor of his wage have been paid. Other Edgar profit less from employee Bob at $9 instead of 8, a little profit is better than none. So Bob gets a raise. But the new law is bad new for Simon. Simon’s labor generates only $4 an hour for Edgar. The $9 minimum wage is $5 more than that. Edgar will be losing $5 an hour by keeping Simon on at the new legal minimum. So Simon doesn’t get a raise, instead he losses his job. Edgar is irritated. The minimum wage means that if he wants to stay on business, he has to either invest for machines to do the work that unskilled laborers like Simon were doing or move production to another country where minimum wage laws aren’t a problem. Edgar believes both of these option are less profitable for him than employing local workers . Otherwise, he wouldn’t have hired Simon. For Simon, the outlook is bleak, losing his job would have been bad enough. But the minimum wage continues disadvantage him even while he is unemployed. Because he’s young and doesn’t have much experience. It’s likely that the extra revenue Simon’s labor would create for any his employer would be low. Potential employers expect to lose money hiring Simon at the minimum wage so they turn down his application. Simon was glad of his factory job even with its low wage, he hopes to build up experience which would raise his productivity and give him a change to move to better place are more satisfied work. But the new law prevents him to doing so. This is why the minimum wage have been described as removing the bottom rung from economic ladder.
when we see social interaction that seem unfair, one response in to demand that behavior we disapproved of be outlawed, but we should keep in mind that this kind of intervention has unintended consequences. Some people suspect that prohibiting voluntary exchange often does more harm than good. they believe the proper function of law is to discourage the initiation of force and we shouldn’t create barriers that prevent people from doing their best to be improved their lives.