In July Congress passed legislation that gradually raises the minimum wage to reach $15 by 2025. Why would Congress feel the necessity to engage in the price control of wages? Since there are already probably as many answers to that question as there are wage earners, it will not hurt to add one more.
Say you sell soap, people love your product, and buy great quantities of it. You have the opportunity to raise your prices confident your sales will remain high. On the other hand, suppose you make a mediocre soap that people do not particularly like. You will be lucky to sell some of it at a low price.
Same with your abilities in the marketplace. If you are good at what you do and have abilities that are on demand, people will pay good money for your services. If you do not, you will be paid little, assuming someone will hire you. A mandate on how much people must pay for soap would be called price control. So would a mandate on how much people must pay for abilities.
Leaders resort to price controls when their jurisdictions lack a functioning market, either by misfortune, incompetence, or conscious choice. A functioning market encourages competition and efficiency from all participants – businesses and workers alike. Absent a functioning market, leaders must resort to ever increasing levels of interventions such as price controls.
Although the U.S. talks about a free market, it really does not have one. Leaders have slowly stifled it, starting in earnest with Roosevelt’s New Deal. Today, there is economic intervention in every nook and cranny of the economy. If some law or regulation is not mandating subsidized housing for those who cannot afford to live where they want to live, it is mandating subsidized electric cars to fight climate change.
As legislators spend more than they collect in taxes to ensure today’s equivalent of Herbert Hoover’s chicken in every pot and car in every garage, the national debt explodes, the Federal Reserve decimates interest rates so as to afford the servicing of the debt, and cheap money allows businesses to buy out competitors.
So now, with less competition, why would businesses worry about paying workers good wages? They don’t.
Meanwhile, the economy needs lots of purchasers of goods and services in order not to collapse. The solution is a mandated minimum wage, sometimes over and above what workers with inadequate or unneeded skills are worth.
So, there is a reason why Congress passed the $15 minimum wage.