The reason I am opposed to even having a minimum wage can be seen in this article by Kevin Drum.
http://www.motherjones.com/kevin-drum/2012/04/why-high-inflation-good-recession
A brief summary of the article states that one of the problems that is keeping the economy from recovering from a crash is that wages are not falling across the board – and in order to get more job growth we need inflation to lower real wages by increasing prices.
Kevin Drum a lone voice screaming for inflation the current monetary US monitary policy has been inflationary for years- Ben Berneke who headed the federal reserve during both the Bush and Obama administrations infamously gave a speech called “Deflation: Making Sure "It" Doesn't Happen Here” http://www.federalreserve.gov/BOARDDOCS/Speeches/2002/20021121/default.htm
to use Kevin Drum's logic the reason a junior college student can't get a part time job at the local burger joint is because the local electronics company refuses to cut the pay for their engineers.
Perhaps the problem is not employers are to stupid to realize they should cut wages but there is a law that says they can't pay anyone less than $7.25 an hour.
The main objection that people have to repealing the minimum wage is the notion that it is necessary to ensure people have a living wage however inflation destroys real wages so if a living wage is going to be the yardstick – we have to ask which does the least amount of damage to this goal.
If an employer does not think they can afford to keep X amount of people employed full time- they will cut hours and fire people. If an employer is reluctant to cut their payroll at all it is because they are making money and need people to run the business. If an employer is reluctant to fire an individual it is because they believe it would be hard to replace them and the job is essential to the business.
If the minimum wage were repealed you will likely see pay fall- at least for entry level jobs. I'm not sure how low it would fall in either nominal or real terms. All I can say is the following if a job currently pays $7.25 and and someone were willing to do it for a $1 an hour it is because they are desperate for work and does not think they could get more and right now they are standing on the side of the road with a “Will work for food” sign.
I would also expect prices to decrease as well – In a bad economy businesses are not selling their goods ans services so they will lower prices to increase sales and get higher profits and between the two real wages won't change that much but getting a job would be a lot easier.
This is economics 101 and is the reason the Austrian school of economics believes if it weren't for monetary policies falling prices would be the norm even in a good economy as companies would look at new technology and production methods to reduce their overhead.
In the short term- there would be two reasons prices would not decrease when the cost of labor decreases the first is good the second is not.
The good reason is the average business's payroll does not decrease by much if any at all.
In this case entry level jobs might start people at $5 but this translates to a lot of low skilled jobs being reshored to the US, and a massive hiring spike which wipes out a lot of unemployment and forces employers to get more generous with wages.
The other one which would be bad- is taxes, regulations , subsidies and other government imposed expenses distort the market more than the minimum wage does- this fear is the reason I support tax tort and regulatory reform and oppose corporate subsides.
The main argument against these reforms is the notion that all regulations on the books are vital and necessary and the only people these reforms would benefit is the top 1%.
A lot of times these arguments strike me like they believe the regulatory process is to climb Mount Sinai and wait for God to carve the new additions to the regulatory code and as divine God given commandments altering even 1 will cause the nation to fall apart.
In reality the regulatory process is as follows- congress vote on a new law to set guidelines on what they want to regulate.
Then either an existing or new government is created and tasked with both writing and enforcing new regulations which go into effect. There is a bill that cleared the house but has been held up in the senate called the REINS act which is aimed at requiring Congress to vote on any regulation that is expected to cost more than $100 million annually.
It was introduced on the senate by Dr. Rand Paul- http://www.paul.senate.gov/?p=REINS_act
and knowing his bend that means there is no oversight currently. While I don't think the bill goes far enough I do believe the current system is flawed for two reasons.
First is that it is under the constitution congress supposed to make laws not unelected bureaucrats.
The second is that this is inherent conflict of interest- as adding more regulations gives the bureaucracy reason to expand which means promotions as someone has to supervise the new office.
Even the reform and leaving the minimum wage alone to a lot of people on the left is unacceptable since they believe inflation is necessary for economic growth making the claim deflation is 1000 times worse than inflation. They claim that falling prices will lead to a deflationary death spiral as people will hoard money and put off purchases out of fear they might get something cheaper if they wait and the increasing real value of existing debt will destroy what ever is left of the nation's wealth.
As we can see by the fact people are willing to buy computers despite the fact they do get better every year and I doubt people who could afford to buy food would be willing to let themselves starve out of fear they could sell
As for debt- as the recent crash shows inflation can rob a person of their ability to pay on debt as there is a chance their income won't keep up with inflation.
If people expected prices fell across the board people would choose to save money and buy things they wanted and not get into as much debt in the first place.
They will often point to Japan's lost decade or great depression as proof that you shouldn't allow deflation to happen but in both cases the government was trying to fight deflation.
Considering that the ecconomy recovered from every other panic with out a major stimulus package the whole argument we need one should be suspect.
