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Showing posts from May, 2007

Why minimum wage is bad for the little guy

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Minimum wage and other worker protection schemes are put in place by politicians with seemingly good intentions. Even if the intentions are good, I don't believe it's good for the economy. Let me try to demonstrate:

Imagine you have lost your job and decided to start a hotdogstand. You get a stand and set it up at a busy location and hot dogs sell quite well. Business is going well, but with the money you make you can't send your kids to university, so you want to start a second stand.

First you have to save up for a second stand, or more likely you have to convince a bank to lend you money to buy the second stand. Then since you can't clone yourself, you also have to find someone to man the second stand. You now have a loan to pay off for the second stand, so you're a bit low on cash to pay the guy who mans the second stand. You make him a deal, you pay him very little, but for each hot dog he sells, he gets some money. He figures he'll take the risk, …