The minimum wage argument frequently works its way into conversation. There seem to be many who think mandating a minimum wage to businesses will increase wealth and that the general welfare of society will improve, but this is not the case. This is my attempt to offer a perspective on minimum wage with which some of you may not be familiar.

A wage is not some arbitrary amount that an employer chooses to pay a worker on a whim. If a business doesn’t make money, it will fail; therefore, the employer, by necessity, must pay the worker less than the value that the worker produces in most cases. If a business owner paid an employee more money than the employee was able to earn for the company, there would be no profit, and without profit, it becomes difficult to save and invest in the company. The business would stagnate, become noncompetitive and die.

There are companies like Gravity Payments that run the numbers and decide they can afford to increase their employees’ wages just because they want to, but the key difference here is that if they had found that their company could not afford the pay hike, they could have continued with the old rate. With minimum wage laws, the owner pays or faces imprisonment.

With all this in mind, let’s say that Joe is capable of producing $10 per hour for a business. The employer has to decide some wage to pay Joe that will allow for profit but also keep him from leaving for better pay at some other business. These two considerations create a limited range of wages from which the employer can choose. Let’s say that the employer settles on $6 per hour to pay to Joe.

Now let’s say that minimum wage is increased to $15 per hour, and the owner must pay his employees at least that much under threat of imprisonment. Now the employer is faced with a choice: fire Joe and do the job himself, keep Joe and suffer a loss in profits, or fire Joe and pay for a machine to automate the job. If Joe is fired, he could probably find another job, considering his experience. If the job is automated, no one will ever have that job again (assuming the robot performs adequately). If Joe manages to keep his job, he will get a raise.

Now let’s consider Joe’s younger sister Sam, who has just started looking for a job. She, like Joe before he got experience, is capable of producing $10 per hour for a company. Unfortunately for Sam, the minimum wage is $15 per hour. For this reason, hiring her would be a terrible business decision because the business would be losing $5 for each hour she worked for them. I’m sure many of you, like myself, have experienced difficulty in finding work without any experience even when applying to unskilled positions, especially as high schoolers.

In this way, minimum wage prices the lowest skilled workers out of the labor market. If you can get a job, you know that you will be paid at least whatever the wage floor is, but the trick is getting that first job when you probably will be costing the company money for the first few months until you can do your job well enough to warrant your pay. Ultimately, you have to decide if forcing businesses to pay workers a minimum amount is worth preventing low-skilled laborers from finding employment and gaining experience. Ask yourself: if increasing minimum wage were a good way to bring people out of poverty, why not just set it to $100 per hour and enjoy a huge economic boom?

This perspective on minimum wage law isn’t considered by people very often, so I hope this offers you a new point of view on an issue of which I’m sure you were already aware. When we talk about government interference in the marketplace, we must consider, in the words of Bastiat, that which is not seen. In the case of minimum wage, we can see the increase in the wage floor, but those who go unseen are people who now have a very difficult time finding work because they’ve been priced out of the labor market and, also, those who have lost their jobs because their productivity didn’t warrant a government-mandated raise.