According to the book of "Economics in One Lesson" by Henry Hazlitt, this book is an analysis of economic fallacies which are quite prevalent. The first part of this book argues that the art of economics consists in looking the short and long term effects of any policy for the whole groups (Hazlitt, 2008). Some public policies published by government address the problem and benefit the community in the long run, while other policies only benefit one or some groups at the cost of other groups and raise another problem later. They are the fallacies of overlooking secondary consequences and only striking the eye.
Hazlitt (2008) showed that the whole of economics can be reduced to a single ...view middle of the document...
Therefore, there is no economic growth in the society. Most economists believe that minimum wage laws cause unnecessary hardship for the very people they are supposed to help.
The minimum wages are the specific example of price floor in economics. The figure shows the effects. The employers are the demanders of labour, and the employees are the suppliers of labour. Without the minimum wage, the normal one is W* and quantity of workers (whether unskilled or skilled workers) is L* in the free market. Then the equilibrium is the intersection point of two lines, E*. Once people establish a minimum wage, Wmin, which is higher than the equilibrium market price. Moreover, the quantity of unskilled workers who are unemployed is from Ls to Ld (Gans et al., 2012). Simultaneously, the minimum wages result in more people entering the labour market since they consider the wage is acceptable and reliable. Finally, the issue of unemployment is caused by the price floor of minimum wage in the labour market. Economists for the Organization for Economic Cooperation and Development (OECD) summarise economic research results on the minimum wages and advocate that if the wage floor set by statutory minimum wages is too high; this may have detrimental effects on employment, especially among young people (Samuelson, 1993).
Australia provided one of the earliest practical demonstrations of the harmful effects of minimum wage laws when the federal court created a minimum wage for unskilled men in 1921 (Bovard, 1985). The court set the wage at what it thought employees needed for a decent living, irrespective of what employers would be willing to pay. Labourers whose productivity was worth less than the compulsory wage could find work only in occupations not covered by the laws. For instance, a company should decide whether people worth or not the minimum wage $17 during the interview. They will obviously recruit those people who worth more than $17. The historical record shows that unemployment remains a particular issue for unskilled labourers for several decades.
Moreover, it is easy to overlook the fact of minimum wages that regional wage differentials average together to produce the national result (Geller, 2001). A federal minimum wage of $10 an hour may substantially reduce the employment rate in rural areas, where it exceeds the prevalent wage, but have little effect on the employment rate in some large cities, where almost everyone earns more than $10. There...