Free exchange: The argument in the floor | The Economist
MINIMUM-WAGE laws have a long history and enduring political appeal. New Zealand pioneered the first national pay floor in 1894. America’s federal minimum wage dates from 1938. Most countries now have a statutory pay floor—and the ranks are still swelling. Even Germany, one of the few big countries without, may at last introduce a national one. And in an era of budget austerity and widening inequality, the political temptation to prop up wages at the bottom by fiat may well grow.
Economists have tended to oppose minimum wages on the grounds that they reduce employment, hurting many of those they are supposed to help. Milton Friedman called them a form of discrimination against low-skilled workers. In standard models of competitive markets, anything that artificially raises the price of labour will curb demand for it, and the first to lose their jobs will be the least-skilled workers.