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California legislators recently voted to raise the state's minimum wage to $10/hr, thereby guaranteeing more compulsory unemployment for people in The Golden State. Professor John Taylor pictures the situation in ECON 101 terms.
In unhampered markets, the prevailing price occurs at the intersection of supply and demand. Minimum wage laws place a floor on price such that markets cannot 'clear.' The result is a gap, or 'surplus,' of labor. Quantity of labor demanded by employers at the minimum wage rate is lower than the free market price. Moreover, there are people willing to contract for less than the legal minimum but they are prohibited from doing so.
It should also be obvious from the above picture that the higher the floor set by the minimum wage, the greater the 'surplus' of labor.
California just lengthened its unemployment lines.
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In the long run the worker can never get more than the consumer allows.
~Ludwig von Mises
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