The real tragedy of minimum wage laws is that they are supported by well-meaning groups who want to reduce poverty. But the people who are hurt most by higher minimums are the most poverty stricken.
Interpretation
Minimum wage laws aimed at reducing poverty can inadvertently harm the very people they intend to help.
Milton Friedman argues that minimum wage laws, while supported by good intentions to alleviate poverty, often lead to unintended consequences that can worsen the economic situation for those they aim to assist. The increased wage floor may lead to fewer job opportunities for the most impoverished individuals, illustrating the complexity of economic policies where well-meaning interventions can sometimes create more harm than good.
In practice
During a discussion about economic policy, one might quote Friedman to illustrate the unintended consequences of minimum wage laws.
The economic miracle that has been the United States was not produced by socialized enterprises, by government-unon-industry cartels or by centralized economic planning. It was produced by private enterprises in a profit-and-loss system. And losses were at least as important in weeding out failures, as profits in fostering successes. Let government succor failures, and we shall be headed for stagnation and decline.
Universities exist to transmit knowledge and understanding of ideas and values to students not to provide entertainment for spectators or employment for athletes.
There is no place for government to prohibit consumers from buying products the effect of which will be to harm themselves.
There is one and only one social responsibility of business - to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.
The great danger to the consumer is the monopoly -whether private or governmental. His most effective protection is free competition at home and free trade throughout the world. The consumer is protected from being exploited by one seller by the existence of another seller from whom he can buy and who is eager to sell to him. Alternative sources of supply protect the consumer far more effectively than all the Ralph Naders of the world.
The strongest argument for free enterprise is that it prevents anybody from having too much power. Whether that person is a government official, a trade union official, or a business executive. If forces them to put up or shut up. They either have to deliver the goods, produce something that people are willing to pay for, are willing to buy, or else they have to go into a different business.
It certainly is dangerous that there are only a few clubs left in Europe that can afford to pay millions. At the end of the day however, the spectators decide the rates of pay - by watching the games and consuming the goods and services advertised on sports TV programmes.
The proper goal of an economic democracy agenda is to replace the global suicide economy ruled by rapacious and unaccountable global corporations with a planetary system of local living economies comprised of human-scale enterprise rooted in the communities they serve and locally owned by the people whose wellbeing depends on them.
Good economic theory must give the people the chance to use their talents to build their own lives. We must get away from the traditional route where the rich will do the business and the poor will depend on private or public charity.
You don't drive an economy by consuming - the consumer is not the engine, the consumer is the caboose.
What Asia's postwar economic miracle demonstrates is that_x000D_ capitalism is a path toward economic development that is potentially_x000D_ available to all countries. No underdeveloped country in the_x000D_ Third World is disadvantaged simply because it began the growth_x000D_ process later than Europe, nor are the established industrial powers_x000D_ capable of blocking the development of a latecomer, provided_x000D_ that country plays by the rules of economic liberalism.
Instead of abandoning competition and giving banks protected monopolies once again, the public would be better served by making it easier to close banks when they get into trouble. Instead of making banking boring, let us make it a normal industry, susceptible to destruction in the face of creativity.
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