Why would an economist say that the minimum wage should be abolished?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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An economist would say that minimum wage should be abolished because it reduces the amount of work that is available for workers, particularly those who are less skilled.

A minimum wage sets a "price floor" above the equilibrium wage.  In other words, it forces employers to pay more than the services of the worker are worth.  When employers have to do this, their natural reaction is to hire fewer people.  This helps the people who do get jobs because their pay is higher, but it hurts other workers who cannot get hired because the employers cannot afford to hire them.  In economic terms, the quantity demanded of labor drops when the price of labor is raised artificially as it is with a minimum wage.

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