The Politics of Minimum Wage Laws :: Minimum Wage Essays

"We cannot legislate prosperity. When we increase minimum wages by legislative fiat, we kill jobs. Government creates nothing but what it has first taken away." -- President Lyndon B. Johnson Many investigations have been made in an attempt to understand how politics is involved in determining the minimum wage rate. These studies indicate that due to the complex American political system, which distributes power to different levels of government, different variables will exert pressures on the various governing bodies in the United States. In other words, these studies indicate that when it comes to minimum wage legislation, decisions on whether to raise the minimum wage, and what the rate should be, have very limited economic bases, and instead rely heavily on political bases. The most important of which is political ideology. While aspects of other variables contain some economic theories, for example unemployment rate and median household income, these variables have a limited impact, and can even be explained through political interpretations in addition to their economic bases. Considering the fact that minimum wage laws greatly impact the economic equilibrium of the entire country, and impact major economic variables such as the wage rates and the profit rate, it is amazing to learn that economic indicators are conspicuously insignificant when it comes to determining the actual minimum wage rate. This may not necessarily be a problem for the current state of the American economy since minimum wage laws affect relatively few people. However, political decisions are unilaterally dictating policy that greatly impact the economic equilibrium of the country, this threatens the integrity of having economic regulations in the first place. The stated purpose for economic regulation ought to fit with public interest theory, which states that regulations are designed to correct inefficient or inequitable market practices. In the case of minimum wage laws in the United States, it seems to fit better with the capture theory which holds that regulations are implemente d in response to public pressure and political purposes. Minimum wage laws will continue to remain a highly debated topic in economic and political circles in the United States. Instead of simply focusing on whether these laws are good or bad for a society, perhaps we should be discussing the rationale for minimum wage legislation. Why do we have minimum wage laws? Do they respopnd to an economic need or only a political need? My research as indicated that political considerations have taken precedence over economic considerations despite the fact that minimum wages have direct effects on the economic equilibrium for the entire country.