The economic effects of minimum wage
By Sam Little
web posted November 14, 2011
A friend and I were talking a while back about US companies outsourcing work to other countries, and the effects this had on the US economy. I pointed out that one reason companies do this is because there is a minimum wage in America which makes it much cheaper for them to hire people from other countries, and if the minimum wage were taken away, they could hire more Americans. He responded by saying that if we got rid of our minimum wage, people wouldn't be able to survive. This got me thinking about different effects that minimum wage or a lack thereof would cause, and in this essay I will put forth a few arguments for why I believe the minimum wage should be removed.
First, let's look at the claim that people wouldn't be able to survive without a minimum wage. It's true that currently, nobody would be able to live in the US on less than a dollar an hour. However, if all companies could simply set their wages at whatever they wanted, this would also allow them to lower their prices significantly, which would, in turn, result in lower living expenses. You really can't say that it would be impossible to survive without a minimum wage, because you simply can't know what would happen to the market if all wages were lowered. I'm not saying that you would necessarily be able to live while making only 30 cents an hour, but I am saying that you can't say it's not possible.
On the note of survival, we should also keep in mind the fact that many people looking for jobs (e.g. high school students) don't need to survive on the money they get from their job; they would just like some spending money. There are others who have full-time jobs which they can already survive on, but would like an additional boost to their income. They can do this by getting a part-time job for extra money. The point is that even if you couldn't survive on less than minimum wage, not everybody has to.
Secondly, a minimum wage creates a price floor for services. When a minimum wage is in place, companies are sometimes forced to pay more than a certain service is worth. This causes the number of people looking for work to increase, while the number of jobs available decreases.
As you can see here, a price floor on services provided causes the quantity supplied (number of workers) to go up, while the quantity demanded (number of jobs available) goes down, resulting in a surplus of services (because there are more workers than there are jobs). We can see from this graph that a minimum wage actually causes unemployment to go up, because companies cannot afford to provide enough jobs for everyone who would like to work.
Finally, a minimum wage actually takes jobs away from American workers. As I mentioned in my introduction, US companies find it much cheaper to outsource to other countries because people in those countries can work for much less. While many people choose to believe that a minimum wage benefits Americans, we can see that it actually hurts them. If the minimum wage were removed, US companies would begin hiring more and more American workers due to the fact that US citizens could work for less than $7.25 an hour.
From all this, I think it's quite clear that a minimum wage is not really the best thing for an economy. We've seen how really, you can't say that it's impossible to survive without a minimum wage, and that many people don't even need to survive--they just need some extra money. Secondly, we looked at the negative impact minimum wage has on the price system because it is essentially a price floor on services. Finally, we saw that even though people support minimum wage because they think it will benefit Americans, it actually hurts Americans by taking away jobs from them. It is for all these reasons that I believe we should get rid of the minimum wage altogether. 
Sam Little is 17 years old and a junior in high school. He has been homeschooled since the first grade. Among dozens of other things, he enjoys competing in speech and Lincoln-Douglas debate in the National Christian Forensics and Communications Association, playing his guitar, singing, and above all, thinking.