e an unfair advantage over employees. If the market is left as the only mechanism for setting wages, wages will be set below the price clearing level, with the result that people who want jobs will not be able to get them (unemployment) and people who are able to get jobs may not be able to receive as much income as they desire, or as they would be able to generate in a perfectly competitive market (underemployment) (Mazur 1995).
Liberals argue that a minimum wage not only has the effect of increasing the pay for workers, but that this effect is good for business. According to the liberal view, an increased minimum wage means that workers will be able to purchase more goods and services, including those very goods and service that they produce. The result is that the cost of the minimum wage (which is higher than employers would have otherwise paid) is won back by the employer in the form of higher sales. Unused capacity is therefore put into service, and the efficiency of employers is increased at the same time that the minimum wage is imposed. From this standpoint, according to liberals, the minimum wage benefits employers as well as employees (Mazur 1995).
Liberals also argue that the lack of a minimum wage results in decreased efficiency in the market (Mazur 1995) since employers do not have to operate efficiently in order to realize a profit. According to this argument, inefficient employers (characterized by the low wages they pay) that conservatives argue would be forced out of business if a minimum wage were imposed, are effectively having their employees subsidize their inefficiency. Forcing these companies out of business by eliminating their inefficient operations would actually benefit the market as a whole, not just the employees that would receive the minimum wage (Mazur 1995).
Critique of Liberal View of the Minimum Wage
The economic argument against the minimum wage is two-fold. First is the concept t...