The government regulates the labor market by setting a minimum wage that firms must pay their workers. So is a minimum wage worth it? It has the same effect as a price floor on a product. If the equilibrium wage is higher than the minimum wage (price floor), then the minimum wage has no discernable effect on the market, since the equilibrium point will be above the minimum wage. If the equilibrium wage is below the minimum wage, however, then there will be a surplus of labor: at the artificially high minimum wage, demand for labor is lower than supply, meaning that there will be unemployment (surpluses of labor). In this situation, not every worker who is willing to work for the minimum wage will be able to find a firm who wants to hire them.
There are strong arguments for either side. On one hand, if the minimum wage were removed, there might be lower unemployment, but workers might not make enough money to support themselves and their families. On the other hand, with the minimum wage in place, the employed are able to make more money, but many more workers are forced into unemployment and forced to take welfare, while making no contribution towards national productivity.
Whom does the minimum wage hurt the most? Firms will always want skilled workers who can make large contributions to productivity. When the minimum wage is installed, however, it is the least productive workers who are cut from payrolls first. The skilled workers will keep their jobs, perhaps even with higher pay; but the unskilled workers, because their marginal revenue product is lower than the new minimum wage, will be unemployed. The irony of the situation is that most people who advocate a higher minimum wage are hoping to help out the workers at the bottom of the ladder, when in reality, a higher minimum wage could very well put those workers out of a job.
My Opinion: The government should not be telling people what they can and cannot pay an employee. Let the market forces work it out without installing artificial price floors.
