Well first off the minimum wage does not increase unemployment when we aren't in a recession, the natural rate is still reached and we are at "full employment".

In that case I'm assuming you think a cutting of the minimum wage in a recession will allow companies to hire more as their costs have now decreased. Which is a good point.

If the wage is reduced (through cutting of minimum wage), this reduces the overall price level. This is because as wages decrease, other wages are also affected in the same way. This makes it so goods are cheaper to produce and thus to stay competitive, sell for less.

A decrease in the overall price level increases the money supply. More money means more liquidity which people will try to use. This in turn lowers interest rates as there is already an abundance of liquidity in the system. And in the end you have an increase in demand.

Given that the interest rates are already at 0 the end result would be an increase in liquidity but no actual increase in demand. So far cutting minimum wage is just a wash.

But now that the price level is lower, the value of debts stays the same meaning debtors owe more relative to what they owed in the past. Now that debt is a higher % of their wage, they are forced to cut spending in other areas which would just lead to a fall in aggregate demand.

So by cutting minimum wages, in the end all we would have is lower demand and an even worse situation.

"I support a minimum wage because of standard of living issues. The minimum wage is already too low for anyone to live a regular life, abolishing it would just make an increasingly impoverished underclass."

So eliminating those jobs by encouraging capital investment is preferable? 0 income > some income?

Hmmmmm…..

As for free market arguments, those are just silly. Free market ideals are based on many assumptions which, while good for building models, are not an accurate representation of a real economy.

I haven't looked extremely in depth at academic studies of this subject though so maybe there's something very informative I have yet to discover.

Here's a youtube video of Peter Schiff explaining why the minimum wage is terrible.

And heres an article by Peter Schiff about the minimum wage.

Schiff is a candidate for Senator of Connecticut.

Set the nominal minimum wage to a living wage, but make the actual minimum wage inversely proportional to the unemployment rate. Thus, as unemployment increases, the minimum wage (and the cost of unskilled labor) decreases. With more people out of work, business owners could more cheaply hire those out of work. As unemployment decreases, the cost of labor rises.

Obviously, there are potential pitfalls, such as political manipulation of the unemployment rate and determining a living wage. What do you think though?

I am happy there is a minimum wage b/c it helps fight for those who can't fight for themselves.

A floor is fine…. a ceiling is not.

Best, Samurai