A minimum wage is the minimum price at which firms may hire workers, and conversely at which individuals can sell their labor. The government usually sets the minimum wage level at a point that will increase the wages of the lowest earners. New Zealand was the first country to set any kind of minimum wage law when it established arbitration boards in the Industrial Conciliation and Arbitration Act of 1894. There is now some kind of minimum wage or collective bargaining legislation over the minimum wage in more than 90% of countries. There are however large differences in terms of the level of the minimum and how it is set. The United Kingdom for example has a National Minimum Wage set at £5.93 per hour for workers over 21 years old with lower rates for younger people. There is another group of countries that do not have national minimum wages but do have collectively agreed minimum wages. These are usually decided per sector, countries that use this form of collective bargaining to set minimum wages include German and Italy. A few countries such as Macedonia have no minimum wage at all. Opponents of the minimum wage argue that everything should be left to the free market and use supply and demand theory to argue that unemployment will be the result of a minimum, as firms will be unwilling to pay the extra price for workers. Proponents however instead focus on social justice and the exploitation of workers, particularly the most vulnerable.
Businesses operating in a free market are concerned principally with their bottom lines. In order to increase profits, firms will seek to exploit workers, to lower wages as far as possible. This exploitation will continue indefinitely, unless the state intervenes. The state does so by implementing a minimum wage. The lowest paid workers tend to be less educated, less skilled, and less organized than higher-paid employees. This makes them the easiest to manipulate and the easiest to replace. In order to stop this outright exploitation of the most vulnerable members of society, the power of wage setting must fall to some extent within the purview of the state. Certainly, it is far better for state, which has citizens’ best interest at heart, to weigh in on the issue of setting wages than businesses, which tend not to care about their workers’ welfare or have competing interests. Furthermore, a minimum wage sends a social signal of valuation; it affirms that all people have worth, cannot be exploited, and are owed by dint of their humanity a certain level of treatment in the workforce, i.e. a minimum wage. This is important as a means to assist the self-empowerment of the poorest members of society, by encouraging them to value themselves. Also, the minimum wage aids in promoting social justice and equality by lowering wage disparities. Citizens of more equal societies tend to have more in common and can share more in the construction of societal goals and aims. This form of social justice is certainly preferable to the class divisions propagated in the absence of a minimum wage, in which a part of society is relegated to permanent wage slavery.
 Waltman, The Politics of the Minimum Wage, 2000
There is no social justice in denying people the ability to work. The minimum wage serves to benefit insiders who are employed and harm outsiders who do not have jobs and cannot get them due to the dearth of jobs created by the wage laws. The state may have the best interests of its citizens at heart when it institutes a minimum wage, but it accomplishes little when it leaves more of its citizens without work, and thus dependent upon the state for survival.
Without a minimum wage, the lowest paid members of society are relegated to effective serfdom, and their decisions of these members often force others to follow suit, accepting similarly low wages. There is no real freedom of choice for people at this lowest level of the social structure, since they must accept whatever wage is offered in order to feed themselves and their families. Their poverty and desperation for work makes it much more difficult for them to act collectively to bargain for better wages. The minimum wage frees people from this bondage and guarantees them resources with which to make meaningful choices. Without resources there can be no true choice, as all choices would be coerced by necessity. Because people’s choices are intrinsically interconnected, and wages tend to reflect the prevailing pressures of demand and supply, when an individual makes the choice to work for less than anyone else, he necessarily lowers the wage that others can ask, leading to a downward spiral of wages as workers undercut one another, each competing to prove he is worth the least. A minimum wage ensures workers do not harm each other through self-destructive wage competition. What the minimum wage does to alleviate these problems is that it gives individuals the ability to pursue the good life, something that has become a global ideal. People want to be happy, and find that only way to obtain the resources necessary to attain comfort and security is through employment. Fundamentally, the minimum wage grants the freedom not to be exploited, giving individuals the freedom to control their own destinies.
 Waltman, The Politics of the Minimum Wage, 2000
 Hillman, Public Finance and Public Policy: Responsibilities and Limitations of Government, 2009
While it is of course socially desirable that everyone be able to find gainful employment and pursue happiness, this is not accomplished even remotely by the existence of a minimum wage. In fact, it denies more people the ability to pursue happiness because the minimum wage forces unemployment up as it becomes more expensive to hire workers. The choice to work should belong to the individual, whether his decisions have an effect on the wages of others or not. Individuals can only have control of their destinies when they are not limited in the range of their potential actions, which must include the right to sell their labor at whatever rate they find acceptable, be it at some arbitrary minimum or lower.
Employees work harder when they are paid more, but employers can often be more concerned with the short-term bottom line and will not treat workers in the lowest echelons of their firms with much consideration, viewing them instead as disposable and replaceable economic units. Mandating a minimum wage can thus benefit firms, even if they do not recognize it, by making workers more productive and also fostering a general work ethic. As workers feel more valued in the economic system, the more likely they are to work loyally and diligently for their employers. Furthermore, better pay means more disposable income in the hands of employees, which leads to greater demand by them for goods and services. This demand-induced economic growth is a very important part of economic growth. The more people are able to spend, the more money flows into the economy, leading to more business and higher employment. Without the minimum wage, a downward spiral of spending can ensue, proving deleterious to firms and the economy generally. Additionally, the minimum wage decreases expensive social welfare payments, since workers no longer need as many supplements to their wages from the state in order to make up for the shortfall created by too-low wages.
 Freeman, Minimum Wages – Again!, 1994
Employers are not stupid. Many do see the value of higher paid workers and appreciate their harder work and dedication. That is exactly why a minimum wage is unnecessary; firms in pursuit of their own self-interest will pay workers competitive wages. Furthermore, social welfare payments will not decrease with the advent of a minimum wage since while some workers will not require income supplements from the state, the higher numbers of unemployed workers will look to the state exclusively as their source of income, raising the cost to the state and the taxpayer.
When wages are extremely low the incentive to enter alternative markets is increased. This is particularly harmful in the case of illegal markets, such as those for drugs or prostitution. When there is little to be gained from obtaining a legitimate job, no matter how plentiful they might be in the absence of a minimum wage, they would be undesirable by comparison to potentially highly lucrative black market opportunities. The minimum wage is essential for keeping the opportunity cost of entering the black market sufficiently high that people opt always to enter the mainstream, legal market. Furthermore, when the possibility of work in the legitimate market exists, even if work is harder to find due to a minimum wage, the very possibility of getting such a job will serve as a disincentive to pursuing illegal employment.
The incentive to enter the illicit market is actually higher when there is a minimum wage. While the relative advantage of entering the black market might be diminished for some who can enter the legitimate workforce and find employment, the higher numbers of people now unemployed would find it necessary either to seek welfare payments from the government or find alternative employment. Such employment could be readily found in the illegal market.
Individuals are autonomous beings, capable of making decisions for themselves. This includes the ability to make a value judgment about the value of one’s time and ability. If an individual wishes to sell his labor for a certain price, then he should not be restricted from doing so by the state. A minimum wage is in effect the government saying it can place an appropriate value on an individual, but an individual cannot value himself, which is an absurdity as the individual, who knows himself better than the state ever could, has a better grasp of the value of his own labor. At the most basic level, people should have their right to choice maximized, not circumscribed by arbitrary government impositions. When the state denies individuals the right to choose to work for low wages, it fails in its duty of protection, taking from individuals the right to work while giving them nothing in return other than the chimerical gift of a decent wage, should they ever be able to find a job. Clearly, the minimum wage is an assault on the right to free choice.
The state has an obligation to protect people from making bad decisions. Just as it tries to protect people from the harms of drugs by making them illegal, the state protects people from exploitation by setting wages at a baseline minimum. Everyone deserves a living wage, but they will not get this if there is no minimum wage. Businesses ruthlessly seeking to increase profit margins will always seek to reduce wages. This behavior is particularly harmful to those who receive the lowest wages. Upholding the right to work for any wage does not give people on the lowest wages a real choice, since it means people must work for what they are given, resulting in terrible exploitation. Clearly, the minimum wage is a necessary safeguard for the protection of the weak and the vulnerable, and to guard people from unconscionable choices that an absolute right to work would force. Furthermore, the right to work does not mean much if an individual can only find employment in jobs which pay so lowly that they cannot support themselves. Thus, there is little difference between being employed below the minimum wage and being unemployed at the minimum wage. When employed, a person is no longer on unemployment statistics and the government has less pressure to act. When unemployed, they have the incentive and time to campaign for government action.
 Waltman, The Politics of the Minimum Wage, 2000
The ability to provide for oneself, to not be dependent on handouts, either from the state in the form of welfare or from citizens’ charity, provides individuals with a sense of psychological fulfillment. Having a job is key to many people’s self worth, and most capitalist-based societies place great store in an individual’s employment. Because the minimum wage denies some people the right to work, it necessarily leaves some people unable to gain that sense of fulfillment. When people are unemployed for long stretches of time, they often become discouraged, leaving the workforce entirely. When this happens in communities, people often lose understanding of work entirely. This has occurred in parts of the United States, for example, where a cycle of poverty created by a lack of job opportunities has generated a culture of dependence on the state for welfare handouts. This occurrence, particularly in inner cities has a seriously corrosive effect on society. People who do not work and are not motivated to work have no buy-in with society. This results in crime and social disorder. Furthermore, the minimum wage harms new entrants to the workforce who do not have work experience and thus may be willing to work for less than the prevailing rate. This was once prevalent in many countries, often taking the form of apprenticeship systems. When a minimum wage is enforced, it becomes more difficult for young and inexperienced workers to find employment, as they are comparatively less desirable than more experienced workers who could be employed for the same wage. The result is that young people do not have the opportunity to develop their human capital for the future, permanently disadvantaging them in the workforce. The minimum wage takes workers’ dignity and denies them valuable development for the future.
An individual can maintain little dignity when he is subjected to outright exploitation from employers who are unconcerned about their welfare and who have no incentive to pay them anything but the lowest possible wages. A minimum wage ensures that people who find employment can feel real self-worth. Furthermore, if people do indeed only feel self-fulfilled when they are employed, people will be all the more likely to accept poor working conditions and low wages for sake of their self-image. Also, young workers do have means of gaining experience, such as through unpaid internship programs. The minimum wage serves to protect workers of all ages and skill-levels, as no one deserves to be exploited.
Politicians have transformed the minimum wage into an indicator of social development. Governments often cite their raising of the minimum wage as an example of their commitment to fostering social justice and equality. This is all nonsense. The minimum wage is nothing more than a useful, simple tool that politicians can exploit without addressing underlying social and economic ills in society. During times of economic expansion wages are generally rising as new businesses are formed and existing firms take on more capacity and workers. During such times, raising the minimum wage has no effect other than being a useful political move. In times of economic contraction, firms close and lay off workers and unemployment rates rise. In such times, the minimum wage hampers the market from clearing, keeping more people out of work than necessary. For markets to function efficiently, wages must be allowed to fluctuate freely, equilibrating with demand for labor and reflecting the macroeconomic situation. Minimum wages tend to lock in wages at pre-recession levels making countries less competitive and less quick to recover when economic downturns occur. Furthermore, minimum wages can often make countries unattractive for businesses to invest in, as the cost of hiring workers can serve as a serious disincentive. For this reason, businesses tend to locate in countries with no minimum wage laws, such as Germany, or where they are comparably low. In order to stay competitive, to bolster economic dynamism and gain global competitiveness, countries should treat labor like the commodity it is and allow the labor market to self-correct, and not institute minimum wage laws.
While economies may bounce back somewhat less quickly from downturns if wages are prevented from falling beneath a set minimum, it is a worthwhile sacrifice for the sake of preventing the exploitation of workers. The minimum wage is particularly important to uphold in times of recession, since increased unemployment encourages employers to slash wages unmercifully. Such reductions can severely harm individuals and families that often suffer from reductions in real wealth as a result of recessions. Furthermore, in the case of competitiveness, companies do not make their decisions of where to locate based solely on prevailing wage rates. Rather, they value educated, socially stable populations. A minimum wage ensures that working individuals have the resources to provide for the necessities of their families and tends to promote social stability and contentment by engendering feelings of social buy-in that are absent in the presence of exploitation and meager wages. Furthermore, it is not clear that the minimum wage has a significantly detrimental impact on employment.
 Waltman, The Politics of the Minimum Wage, 2000
In the absence of a minimum wage the free market will not tend toward the exploitation of workers. Rather, wages will reflect the economic situation of a country, guaranteeing that employment will be at the highest possible rate, and not be hampered by an artificial minimum. Some incomes may fall, but overall employment will rise, increasing the general prosperity of the country. Employers understand that high pay promotes hard work. Businesses will not simply slash wages in the absence of a minimum wage, but will rather compete with one another to coax the best and most dedicated workers into their employ. This extends even into the lowest and least-skilled lines of work, as although workers may be largely interchangeable in terms of skill, they are distinct in their level of dedication and honesty. There is thus a premium at all levels of a business to hire workers at competitive wages. Furthermore, employers also take into account that there is a social safety net in virtually every Western country that prevents unemployed workers from starving or losing the barest standard of living. For this reason, wages can never fall below the level of welfare payments, as individuals will necessarily withhold their labor if they can receive the same or better benefit from not working at all than from being employed. Clearly, businesses will seek to employ the best workers and will thus offer competitive wages.
 Newmark and Wascher, Minimum Wages, 2010
Businesses are concerned with their bottom line. They will pay workers as little as possible in order to maximize profits. Certainly in some businesses employers require highly skilled workers for which they will be willing to pay competitive wages. However, the people who most require worker protection, those on minimum wage, are generally unskilled and interchangeable with a large body of potential employees. For this reason there is little impetus to pay workers at the lowest echelons of firms anything but the lowest possible wages. Even if some firms are willing to offer comparatively higher wages to entice honest and diligent non-skilled workers, the overall wage schedule will be depressed as far as is economically possible.
Allegretto, Sylvia A, Arindrajit Dube and Michael Reich, “Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data”, Industrial Relations, Vol. 50 No. 2, April 2011, pp.205-240 http://www.irle.berkeley.edu/workingpapers/166-08.pdf
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