Wednesday, October 13, 2010

Libertarian Views of the Law: Fair Labor Standards Act

A few weeks ago I grumbled about how congress often passes legislation that is inimical to their goals and the goals of the United States citizens. This week, I would like to take another look at another legislation which was first implemented in the 1930’s—the Fair Labor Standards Act.

Many libertarian and conservative economists often blame the minimum wage laws for increasing unemployment among low-skilled workers, including teenagers. Even seems to hint at it when they say that “low-skilled, youth workers stand to gain, under the assumption they are currently employed. However, for unemployed teen workers, job prospects look grim.”

As the language indicates, only people who already have jobs while the minimum wage rate increases will benefit. But what about those without jobs, what do they gain?

The rationale behind legislating the minimum wage law was that it was supposed to protect workers from being exploited by their employers. However, like any price control, there will always be a shortage of goods. In this case, those goods in shortage are the labor of low-skilled workers.

There is a patent absurdity in the minimum wage law. Are workers whose sole position is to push carts, should they be making the same minimum wage as the cook at McDonalds, or the cashier in the same store?

Clearly, different jobs require different skills. Yet the minimum wage laws treat all jobs as they are the same.

It also keeps those jobs that are worth less than the minimum wage from coming into existence. Instead of hiring low-skilled workers to do the job, employers will resort to keeping who they have on staff and have them double up on tasks—tasks that can slow them down if they weren’t relegated to another worker (this also effects customer service as well).

One may think that employers trying to find a loophole around this law by not hiring people and paying them at this price are being unfair. But what is so fair about paying people at a price their work isn't worth? This leads us to the question of the function of profits, which will be answered in a later post.

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