Some time ago, I wrote about why I consider minimum wages unempowering and harmful to the least privileged members of society. I contended that minimum wages shut out from the labor market - a fundamental social institution - those people whose labor is least valuable. It prevents them from exercising what little power they have and perpetuates their disenfranchisement by preventing them from accumulating social and human capital through employment.
I'd like to revisit that topic briefly to better explain why a minimum wage effectively bars the least valuable, least privileged, and least powerful members of society from employment.
The process of establishing wages is effectively a negotiation between employer and employee. In some cases - when the employee's power is checked by the presence of many other potential employees - the employer can set the wage. In other cases - when the employer's power is checked by the presence of many other potential employers - the employee can set the wage. The freer the market, the less power both employee and employer have. All the rest of the time, employee and employer negotiate and arrive at a compromise.
Negotiations end when either the parties reach an agreement, or when one party walks away from the negotiation. The threat of walking away without a deal is a bargaining tactic.
This illuminates the brutal consequences of a minimum wage. In the presence of a minimum wage, the employer cannot offer a wage low enough to make the potential employee a contributing laborer. So the employer walks away from negotiation, leaving the employee out in the cold. The minimum wage effectively bars the least valued members of society from participating in the labor market not by outright exercise of force, but by the conjunction of freedom to walk away from negotiation and conditions on the price of labor.
In a modern, wealthy welfare state, the people most affected by the minimum wage and shut out from labor force participation move from job to job, work for cash, consume very little, and rely on friends, family, charity, and welfare. They're not starving to death, but they are shut out of permanent participation in the labor force. Thus they have difficulty accumulating social and human capital - they're stuck in an effective poverty trap.
So here are two general classes of solutions to this disenfranchisement. One type of solution is to remove the ability of employers to step away from the negotiating table. Mandate that employers take any job applicant and pay them a set wage.
The other type of solution - the type I favor: do away with the minimum wage and replace it with an anti-poverty measure that genuinely empowers the underprivileged, instead of one that merely looks nice to us upper-middle-class folks while silently disenfranchising the poorest, least valuable members of our society.