One of the most common price floors that we see is minimum wage. Policymakers who believe that raising minimum wage helps the poor are incorrect for several reasons.
- Minimum wage doesn't assist the poor because less than 50% of people who hold jobs that pay minimum wage are below the poverty line. The majority of people with MW jobs work less than 20 hours per week.
- It's worse for everyone when the demand for labor is elastic.
- Raising minimum wage makes it harder for people to get jobs as well as making it more difficult for people who are currently employed to keep their jobs. This is because the increased labor costs have to come from some other section of the pie.
Minimum wage generally causes a surplus of labor. Just because there's a surplus doesn't mean that something isn't scare, however. There are still opportunity costs to get a good even when it's scarce. Rarity and scarcity are also two different things. It's possible that something that's rare isn't valued, and thus it isn't scarce.
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