Saturday, April 5, 2014

Minimum Wage Laws and the Mess They Create

Automation is not always bad. In fact, the current high standard of living in the United States is largely the result of capital investment and an expanding base of automation. But that doesn't mean all automation is a good thing. Minimum wage laws distort the structure of an economy that exists between wage earners and automation, in favor of automation. This occurs because the new required high wage payments as a result of minimum wage laws results in businesses considering the automation of  parts of their business that they wouldn't otherwise consider automating.

This causes two outcomes: 1. low skilled workers become unemployed and 2. capital is diverted from other capital goods investments in favor investments in  automation that wouldn't occur if it wasn't for the minimum wage laws. This means that capital investment in other sectors will be less and result in the lowering of the potential standard of living for all of us.

1 comment:

  1. I think the TPTB know this, and want 1) to grow the welfare state, and 2) to create a more mechanized world before the great culling.