STEPHANOPOULOS: Should the Federal government be able to set a minimum wage?
PAUL: It's not a question of whether they can or cannot. I think that's decided. I think the question you have to ask is whether or not when you set the minimum wage it may cause unemployment.
Paul went on to argue that a high minimum wage risks pushing up unemployment among unskilled workers. Paul was asked a straight Yes or No question: Does the Federal government have a valid role setting minimum wage? He declined to answer.
TPJ: He danced around it but clearly he's not in favor of the minimum wage--he's learning how to be a politician and give a non-answer to an obvious question. We're not stupid Dr. Paul, we know how to read between the lines. Just because you don't come right out and say the words, "I think the minimum wage is a bad idea and should be done away with" doesn't mean that's not what comes across in your answer. As to the substance of the issue of the minimum wage itself, the following is in part why reducing the minimum wage is a bad idea:
Removing the minimum wage in an economy is akin to cutting wages all across the economy as Capitalist firms will scramble over each other in their rush to reduce costs. This will take the form of forcing employee wages to their cost (ie their subsistence) while simultaneously increasing the work hours that are allowed per day. However to assume that reducing wages to their cost will reduce unemployment is to assume that the labour market can clear, like any other commodity. That is, the market will reach an equilibrium where supply of labour equals demand.TPJ: The minimum wage was instituted to help the blue-collar working class earn a living wage who don't have the same protections and opportunities as wealthy and well-connected workers/citizens. In addition it helps protect the less educated from being worked to death for pennies because they don't have the skills or know-how to obtain a better job where they couldn't as easily be taken advantage of. When you live in an environment of generational poverty, which prevents you from going to school to increase your employment options and chances for upward mobility. Thus gaining a diverse skill-set to increase your chances of employment in varying sectors you need a certain level of guaranteed protections in the workplace to prevent you from being taken advantage of by your employer who knows you have no other way to find a job in a different field. The minimum wage is important for the rest of us too in that it is a hedge against civil unrest because as Bob Marley says, "A hungry mob is an angry mob."
However this is not the case. The labour market cannot not clear. Reducing wages in the economy means that people will not be able to afford the lifestyle they had until that point. This means that people may decide to start getting a second job, or work more hours, or more family members will start working, from a younger or older age as well. This will increase supply rather than fulfill the current demand. You will get the same or rising unemployment while wages stagnate or drop.
This is because if worker wages drop while commodity prices remain the same, so does their real wage and thus their purchasing power. This means less spending and thus less profits for companies. This would mean a cut in production and further laying off of workers and *loss* of positions. Unemployment would rise. In truth, minimum wages do not cause unemployment in the least. This is something supported by a large number of empirical evidence such as the Reagan period where minimum wage declined while unemployment became chronic.