Is minimum wage a price floor or price ceiling?

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A price ceiling is a maximum price. It is instituted in times of national emergency in order to prevent price gouging. This regulation is meant to ensure fairness for the public in times of hardship. A price floor, on the other hand, is the minimum price that can be paid for a good or service. Government subsidies to farmers ensure that their crops have a price floor; before this regulation, prices for crops had no bottom and farmers could lose money on each unit they produced.

A minimum wage is a price floor. It is the lowest price that can be paid for an hour of work. Before the minimum wage, striking workers could always be replaced by workers who were willing to work for lower wages. This sometimes meant conflict between management and workers leading to bloodshed. Minimum wage laws ensure that the worker can make a certain income per each hour of work. Some countries in the developing world do not have minimum wage laws—while this lack of regulation makes them attractive to businesses wanting to offshore their operations, their lack of a minimum wage can lead to workers working in sweatshop conditions very similar to those experienced by labor in Gilded Age America.

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A "price floor" is a government mandated minimum price, as opposed to a "price ceiling" which is a government mandated maximum price. They are both forms of "price controls".  Dogmatic free market economists tend to oppose all forms of price control, but Keynesians and other economists concerned with social justice rather than wedded to abstract economic theories see price controls as essential for humanitarian reasons.

A minimum wage is a type of price floor. Without a minimum wage and other labor laws,  as is seen in countries that allow sweat shops, globalized labor markets can be extremely inhumane, offer workers such low wages that they become essentially indentured serfs in company towns. As many producers will shift factories to agricultural areas in the developing world, where they are the only job in town, there is no "free market" acting to improve working and wage conditions in a globalized economy, and thus international trade regulations and humanitarian pressure groups now, as happened during the industrial revolution in the early 19th century, are needed to address issues of starvation wages, child labor, and humane working conditions.

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