A minimum wage problem is a thought experiment that is not easy to comprehend. The fact is that people are different. Some people create enormous wealth and others do not produce much. Some people are physically, intellectually, or mentally weaker and some are simply not strongly motivated. If their added value or created wealth in a month does not reach the minimum wage, the government forbids them to work.
Is it fair and moral to keep such individuals out of the labor market? After all, most of them live on permanent welfare and may thus well end on the streets. Some of these workers end up as criminals, prostitutes, alcoholics (one could say “a burden to the society”).
They are excluded from labor market; they are denied the right to engage in free economical activities. They are deprived of social contacts, which is often a fringe benefit of having a job. Job brings self-confidence and optimism. Any amount of money which is earned in an honest way, be it one euro in a month, is an achievement.
On the other hand, some employers and businesses provide only enough added value to employ only low skilled workers. They should shut down their businesses, a socialist government might say. This type of business should not exist. The whole idea is eugenic, and allows only certain, decent enough, forms of life.
In 2018, around 5% of employed people in Slovenia earn only the minimum wage. About the same number of people are registered as low-skilled unemployed.
Another 5% are a large group of not registered as unemployed because they had quit searching for a job for various reasons.
A fair estimation is that the two groups combined constitute 10% of active population that do not qualify for a minimum wage. If they earned half of the minimum wage, this would translate to 1% of Slovene annual GDP.
Although this does not seem an extensive amount of money for a state, it could mean a world to those people.
If there were no minimum wage laws and labor market regulation in place, there would be no unemployment in a form we know it today. The Slovenian state does not help the people but instead denies them their basic right – the freedom to work, to earn a living. Their poor economic performance is considered disturbing by social justice warriors and makes them uncomfortable. So they decided to put those people out of business and keep them out of sight (and out of mind).
The Slovenian minimum wage laws are helping nobody but serve only as a sign of moral virtue and a symbol of promoting moral superiority.
This is likely why, by the end of its mandate, the former government of Slovenia raised the levels of general social support by 30%. Aimed at helping the less fortunate, according to the authorities, it was to be a temporary measure and would have ceased to be in place by the end of the year 2018.
Yet, a newly elected government immediately made the social support program permanent. And on top of that, it also raised a minimum wage by 10%.
The same pattern was seen when yellow vests demonstrations occurred in France. President Emmanuel Macron addressed the nation and acknowledged some of the mistakes and flaws in the French system. He also promised to bring about a change and finally announced that the minimum wage would be raised by EUR 100.
And yet, I wonder. How many French workers will be excluded from the labor market and a society?