The law of demand operates in all markets including and especially labor markets. If I operate a lawn service or a car dealership or if I’m a large box retailer, any increase in the price (cost) of labor that is not accompanied by an increase in productivity, will decrease my incentive to hire or retain workers; with my income revenue relatively fixed, I simply must use fewer factors of production. In addition, I also have an incentive to substitute some (cheaper) non-labor resource in an attempt to maintain the overall productivity of the operation. Thus the monetary incentives associated with the income and substitution effects result in fewer workers hired or retained.
This is especially true if the “labor” under discussion is relatively inexperienced and only marginally productive .. After all, wages paid by an employer tend to reflect the estimated monetary contribution an employee is likely to make to overall production. If, for example, there is a new government minimum wage law of $10 per hour and some employees currently generate, say, only $8 in revenue for the company, those workers are on their way to the unemployment line. The law of demand will simply not allow a rational employer to retain those workers or hire workers with similar productivity profiles.
Minimum wage laws always decrease employment opportunities and always interfere with free choice and the freedom of contract. They are supported by politicians seeking votes and by labor unions anxious to cripple non-union, low cost competitors. They are also inherently discriminatory since they hurt only workers on the lowest rung of the employment ladder; workers making $30 an hour are not directly affected. And increasing the minimum wage provides no boost to overall “consumption” (as advocates maintain) since the workers displaced easily negate any (slight) income change for the workers retained.
Finally, increasing the minimum wage is hardly some “moral imperative” as some of its vocal, self-righteous advocates maintain. Indeed, government-mandated minimum wages are an immoral infringement on individual rights and an inefficient economic hoax parading as enlightened public policy. “I’m from the government and I’m here to help you…the working poor.” Don’t buy it.