The media are never better at displaying their economic illiteracy than when they report on the minimum wage.
"Workers got a raise on Friday when the federal minimum wage was hiked 70 cents to $7.25 an hour," the Christian Science Monitor reported last week. "They'll be shouting, "Olé!"
They assume that if politicians declare that workers should get a raise, they will actually get it. But the idea that government can increase wages by decree with only good consequences rests on a serious economic fallacy: that employers set wages arbitrarily. If wages are very low, it must be that employers are stingy.
Actually, employers are stingy; they want to pay workers as little as possible, just as workers want to be paid as much as possible. But in a market—even a government-hampered market like ours—employers' wishes are tempered by the reality of competition. So even if an employer wants to pay workers who produce, say, $4 worth of value an hour only $2 an hour, he won't be able to. Someone else will hire them away for $3 or more.
I've actually been in favor of the living wage for quite sometime (not a major advocate or anything)*. It is hard to live on a wage that is too low. There are many people who are working minimum wage who aren't entry-level, the job they are working is permanent for them. So how about using age to determine the wage? For people under 21 (or 18 if you want to go lower) there is no minimum wage, for those over the age of 21, there is an appropriate wage. Seems like a good compromise to me. No?
*Update: For raising the minimum wage more so than getting a living wage.