Capital And Labor Both Suffer Under Minimum Wage Mandates

The lasting negative impact of minimum wages not only on employment, but also on standards of living in general, can only be fully grasped by taking into account also their long-term effects on output, capital accumulation, and labor productivity. Mises1 understood very well this phenomenon when he claimed that “No one has ever succeeded in the effort to demonstrate that unionism could improve the conditions and raise the standard of living of all those eager to earn wages. Like in the case of unionism, the alleged benefits of mandated minimum wages are restricted to a minority of workers who see their wages rise in the short term. For the rest of the society, which must finance this immediate income redistribution and also face lower prospects for higher standards of living in the futureminimum wages are of no benefit at all.


1.Ludwig von Mises, Human Action: A Treatise on Economics, scholar’s ed. (Auburn, AL: Ludwig von Mises Institute, 1998), p. 764, https://cdn.mises.org/Human percent20Action_3.pdf.

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