Imagine an auction where your work is up for sale; but many other people’s work is also up for sale, so that some lots will always remain unsold. There are more workers than jobs.
What is the best strategy for someone who wants a worker, any worker? It is to be the first to bid, bid the minimum, and then not raise anyone else’s bid. Raising is counterproductive because supply exceeds demand, and one can always wait until other buyers have hired their workers to bid the minimum on one of the lots left over. Because this is the ideal strategy, everyone will be using it. Every lot of work that can be bought, is bought, and for the minimum possible price.
For the worker, the only possible strategy is to accept any bid, because if they do not accept, they will be left till last and their work will be one of the unsold lots.
There is a way out for the worker, and that is to learn a skilled trade. However, this is a way out only for that worker. Other unskilled workers are still caught in the same system, and because there are still unskilled jobs and unskilled workers, the minimum-wage auction will go on as before.
Moreover, if too many workers learn skilled trades, employers in those trades will fulfill their quotas, leaving these overqualified workers to compete for unskilled jobs where their skills are irrelevant–back to the minimum-wage auction.
When the minimum wage is too low, the unskilled (or overqualified) worker naturally tries to fill their own needs, usually by taking more than one job, and by adding more family members–children and spouses–to the job market, to take jobs rather than being homemakers or students. This unbalances the system even further: There are yet more workers, and yet fewer jobs. The employer is able to bid even lower, and the worker must immediately accept any offer they can, for fear of not being employed at all.
When the employer hits the federal minimum wage, they cannot reduce the worker’s pay further; but they can still split jobs into part-time positions without benefits, hire people to work for tips, and hire “self-employed” “independent contractors” who can be paid less than minimum wage because they are technically not their employees. And this is what they do, because the market permits them to do it, because people still take those jobs, because those are the only ones they can get.
We have too many people in the work force and too few jobs for them to do. A low minimum wage forces more people to take more jobs, while simultaneously allowing employers to pay less.
If we raised the minimum wage, then there would be fewer workers, because a minimum wage job would once again be enough to support a family. Many jobs are being replaced with automation, but because of the higher minimum wage, those jobs would no longer be desperately fought over by unskilled workers.
As more jobs are replaced by automation, we may end up with the same scenario again: People fight over jobs, and employers find ways to pay less and less. At this point, we would need to institute a universal basic income, paid for by taxes on corporations. There’s simply no way around that–even though it might slow down when employers are forced to stop hiring so many part-timers and contractors, the number of jobs will eventually be much less than the number of people willing to work. At that point, those extra workers will be supported by universal basic income and, instead, do unpaid work like art, volunteer work, or study. The only alternative to this is a world in which a majority of unskilled workers are barely scraping by on half a job, crammed together in apartments that take five salaries to pay for, unable to afford health care, higher education, or anything but the next day’s low-quality food–and sometimes not even that.