Should There Be a Minimum Wage?
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Wages should be set by workers’ needs, not by market bargaining. Left to the market, wages come out of an unequal contest between employers and workers, so there’s no reason to expect them to be fair. Instead, a fair wage can be worked out from what a worker needs to live decently, then fixed by law.
Justice H. B. Higgins made this argument in the 1907 Harvester judgment, which laid the groundwork for Australia’s basic wage. He rejected leaving pay to the unequal contest of the market and based a fair wage instead on “the normal needs of the average employee, regarded as a human being living in a civilised community.”
Economist Thomas Sowell argues that focusing on “needs” or “fair wage[s]” is bad because those criteria “pay[] little or no attention to the worker’s skill level, experience, or general productivity. So it is hardly surprising that minimum-wage laws set wages that price many young workers out of jobs.” He says such laws have had “devastating effects … on black teenage unemployment rates” in particular.