his is an understandable position. After all, the gap between richest and poorest has grown very wide in recent years. But in my view, minimum wage laws are not good laws at all. That’s not out of lack of compassion for low-wage earners, or because I like inequality. That is because I think that there is a better way to achieve a decent standard of living for the poorest in society.

The minimum wage is a factor in creating unemployment. Despite what's often said to the contrary, it's true: Countries with no minimum wage tend to have much lower unemployment. Right now, America is suffering a serious deficit of jobs, with over three jobseekers for every available job. We need all the jobs we can get.

So how does the minimum wage create unemployment? Minimum wage laws are a price control. They dictate the minimum level that a company can pay a worker. If the minimum wage is $10, and a company wants to take on a new employee that they determine will be worth $8 an hour, they have a choice — either pay $10 an hour, or not hire the employee. Sometimes, the company will accept a hit to their profit margin, and pay the employee $10 an hour. Sometimes they will just not hire a new employee at all. Or, increasingly, sometimes they will go overseas and hire an employee elsewhere — like China — where wages are far lower. This is a particularly cruel scenario because it discriminates most against the poorest and youngest workers in society.

Empirically, the minimum wage has failed to reach its goal of ensuring a fair wage for low wage workers. Worker productivity in America has risen and risen, yet the minimum wage has not. As this chart via Dean Baker shows, it has severely stagnated:

http://azizonomics.files.wordpress.com/2013/02/min-wage1-fig2-2012-03.jpg?w=500

I propose abolishing the minimum wage, and replacing it with a basic income policy, a version of which was first advocated in America by Thomas Paine. Individuals would be able to work for whatever wage they can secure, meaning that low-skilled individuals — especially the young, who currently face a particularly high rate of employment — would have an easier time finding work. And the level of basic income could be tied to the level of productivity, to reduce inequality.

There are two kinds of basic income policy. The first is a negative income tax — if an individual’s income level falls beneath a certain threshold (say, $1,500 a month) the government makes up the difference. Funds for this could be accessed by consolidating existing welfare programs like state-run pension schemes and unemployment benefits, and by closing tax loopholes and raising taxes on corporate profits and high-income earners. Germany has enacted a similar policy — called the "Kurzabeit" — and it's been credited with shielding the German labor force from the worst of the recession and keeping their unemployment rate low since.

The minimum wage is a well-intentioned idea. But it has not proven successful, and it creates obstacles to employment. There is a better alternative

http://theweek.com/article/index/253795/there-is-a-better-alternative-to-raising-the-minimum-wage