There have been several recent campaigns to raise the minimum wage across the country. President Barack Obama and the Democrats proposed to increase the federal minimum wage, fast food workers have held protests in cities to boost their wage to $15 per hour and there have been several scattered attempts to institute a minimum wage for tipped workers, such as drivers and waiters.

In every case, the crux of the argument in favor of increasing the minimum wage is, in essence, the same: people are not being paid as much as they should be, so the government must intervene and force employers to pay more.

Many minimum wage supporters hold that tipped workers are the most egregiously exploited by their employers. Since tipped workers are paid a much lower base wage and there is no guarantee that they will ever earn the minimum wage of other occupations-this is an understandable concern.

During my high school summers, I worked for tips. I shared in the frustration of being paid under three dollars per hour, and was annoyed when my tips failed to push my pay to what others were receiving at their minimum wage jobs. Yet, despite my frustrations and sympathies, I had to recognize a basic economic truth behind any minimum wage, tipped or not: low-paid, unskilled workers do not always generate enough financial value to justify a minimum wage, let alone a "living wage." Business owners hire employees to generate additional productivity for their company, and as a result, to gain profit.

When laws prevent them from hiring employees at a profit, they dismiss employees, or do not hire them at all. By setting a fixed price for all labor, minimum wage laws make it unprofitable for businesses to hire anyone below a certain skill level; if a person cannot produce as much as the minimum wage mandates they must be paid, they will simply be unemployed. In the words of famed economist Murray Rothbard, "All demand curves are falling, and the demand for hiring labor is no exception. Hence, laws that prohibit employment at any wage ... must result in outlawing employment and hence causing unemployment."

The minimum wage achieves the opposite of its stated goal, by forcing low-skilled workers out of the market. In order to help the unemployed, it should be repealed immediately.

Consider the following hypothetical. Imagine three fry-chefs at a fast food chain: Smith, Jones and Wilson. Wilson is by far the most skilled of the three and she generates $13 of value for the company each hour. Jones generates $10 of hourly value, while Smith generates just $8 of hourly value. All three are paid $7.50 per hour.

One day, the state government passes a new minimum wage law, which mandates that no worker can be paid less than $10 per hour. The politicians who supported it preach about how the law will benefit unskilled workers-"the working poor," they call them-and herald a new age of prosperity for the weak and the meek.

Observe the consequences this has on our fry-chefs. For Wilson, the new minimum wage law is a boon-she gets a two dollar raise, which she certainly deserves. Jones also gets the same raise, and both are paraded as examples of how politicians can rescue downtrodden workers. The public sees the law's benefit and approves of it.

There is much that goes unseen by the public, however. While Jones has received a raise, he is getting paid the exact amount of money that he produces for his employer. Jones benefits in the short term, but since he is no longer producing profit, he must improve, or risk being replaced in the future by someone who will generate a profit.

Smith, on the other hand, is in trouble. The fast food chain was losing two dollars for each hour he worked, so they laid him off. Now he's out pounding the pavement looking for a new job, but he can't find one because none of his skills are worth more than $10 per hour.

Smith has been priced out of the job market and is now part of the growing ranks of the chronically unemployed. They form a permanent new class of people whose skills cannot produce as much as the law requires them to be paid. This group, who the minimum wage law was supposed to help, has instead been cut off at the knees. It has deprived them of the work they needed to gain experience and on-the-job training, as well as money to invest in themselves.

The bottom rungs of the economic ladder have been removed, and the only way to jump the government-imposed gap is to have someone pull you up from above. In order to gain skills, unskilled workers become dependent on charity, government programs or loans to buy them the expensive education they now need to even participate in an exclusive workforce.

The minimum wage is the worst kind of a politician's trick. They promise the earnest, unskilled, working poor a chance to be paid more in exchange for their votes. The politician gains power and prestige as a champion of those in need. Meanwhile, the needy are ground into the mud as the politician stands on their shoulders, destroying their ability to rise independently while cementing their dependence on political assistance.

Top-down political solutions like the minimum wage are foolhardy, since they will always have unintended consequences that harm the weak while benefiting deceitful politicians. The only way to create opportunity is to allow people to freely pursue their own voluntary private contracts. True laissez-faire capitalism-not heavy-handed interventionism-is the only path to prosperity.
*