Wages are set by supply and demand


I recently became a student here at the U, and yesterday I began picking up The Chronicle. While reading the Opinion section, I came across the bickering between Teresa Wilde and Kellen Wilson (“Wilson doesn’t know how to make an argument,” Jan. 10).

Though I agree that no resources were cited in Wilson’s letter, I can hardly believe so many people are still ignorant with regard to minimum-wage laws. I thought the debate was all but over.

If you’re going to institute (or raise) a minimum wage, for instance, at $8 per hour, why not raise it to $20?

The fact is, even if a dollar raise in the minimum wage doesn’t seem to affect the local McDonald’s to the point of immediately firing employees, businesses have a finite amount of money to spend on human capital.

Instituting an arbitrary wage law will not magically enable businesses to be able to pay that wage to all employees on a full-time basis.

What will likely happen is that companies will allot a few fewer hours to part-time workers who do not need to support families or meet other financial commitments. No large change will be obvious.

The fact remains that “wage” is just another term for “price,” and prices are set by supply and demand. If $2 per hour is too low a wage to pay a fast-food worker, no potential employee would accept such a position. If an employee is worth $8 per hour to a business, that business will pay the wage. If a business is not paying a worker what he or she is worth, competing businesses will.

If minimum wage laws are raised to an arbitrary price (and I say arbitrary with regard to the labor market, not with regard to what some may say is a “livable wage”), inexperienced workers who did not previously have the skills to make that wage will simply be unable to find work anywhere.

Here’s a simple exercise: Walk to the economics department, find someone who doesn’t look busy and ask him or her to elaborate his or her opinion of minimum wage laws.

Christopher Simons

Freshman, Pre-Computer Engineering