Reply To: Artificially Induced Wage Parity


No apologies are necessary. If I now understand the scenario correctly to which you are responding, someone is claiming that raising the minimum wage will merely create a wealth transfer from the capitalists to the lower-skilled workers without having any effect on employment.

Even if this were true, you are correct that raising the minimum wage would still have detrimental effects on social production and therefore, middle class standards of living. The main reason is such a transfer de-capitalizes those who have demonstrated superior entrepreneurship by running successful business enterprises and capitalizes those who have not demonstrated such abilities. The entrepreneurs would have invested a larger portion of the capital transferred than the workers will invest and would have invested it more wisely. Social production suffers and standards of living fall below the levels they would have obtained. Moreover, by giving monetary incentive to workers who have not produced value commensurate with their subsidized income, the coercive transfer will draw more marginally productive workers into the subsidized areas and out of areas in which the value of what they produced was higher. And, by taking monetary incentive away from entrepreneurs who have produced value, some of them are draw into other areas in which they produce less value for consumers at large.