I've been labeled as someone who wants a return to slavery because I oppose the minimum wage laws. I believe that few people actually give any real thought to these laws as they very effectively raise the cost of living for the working poor and also very effectively kill jobs. As it is apparently not too obvious to most people how this works, let me explain with some analogies:
Angela is a high school dropout and must apply for any jobs that are available. She's smart and hard working and takes on a job as a waitress that pays $6/hr plus tips. She figures that if she works hard, she'll easily make more than the minimum $10/hr wage. Unfortunately, the restaurant she's working at is struggling and the customers are few and far between. After a couple of months she is looking for another job. She is not making $10/hr even with the tips and her rent is beyond her means. It's not a great place, but the minimum wage has made all of the low rentals demand the same price, regardless of their condition, and that price is about 40% of full-time minimum wage income (40% of $1600/month) or $640. She would have willingly taken a lower cost rent if one was available until she could afford something better, but instead she cuts back on her food and goes without other necessities.
Brad got into drugs in his early teens and never quite got his act together. He's had 4 or 5 minimum wage jobs but keeps getting fired and is basically unemployable. He applies for and receives welfare which is enough to get him by if he keeps out of the drugs. There are thousands of people like Brad who are living in very good government housing units, significantly better in fact than anything that Angela, who's working hard can afford. As a worker, Brad needs constant supervision, but at $10/hr, nobody will hire him. A wage subsidy instead of welfare would allow Brad to work, maybe develop some self esteem, and perhaps turn his life around. A wage subsidy would allow taxpayers to not pay 100% of his existence as they do now. A wage subsidy would not fix the rent problem, but it would reduce the reliance on social assistance.
Charles is just like Brad. In fact they hung out together growing up but Charles' parents moved their family to a state that believed in people helping themselves. Anything resembling socialism was outlawed in the state. There was no income tax, just a consumption tax to pay for infrastructure. When they moved to NuState Charles' father (Edward) bought several rental properties because they cheap. The rents he collected were low, but it was enough to cover his costs and give him some cash flow. Charles entered his 20's as basically unemployable. With no minimum wage laws and no social welfare, Charles wasn't able to live off the taxpayers like Brad. His parents allowed him to stay in their home for a while but told him he had to get a job.
Charles took a job at a grocer's collecting carts in the parking lot for $2/hr and managed to stay out of trouble. After a couple weeks, the store owner needed someone to clean the property and offered an extra $1/hr if he did it well. Charles feared living on the streets and agreed to do the job. He was only making $120/week but it was enough to pay for his share of the groceries and his parents were pleased. For the first time in his life he had paid at least part of his own way and decided that he would like to live on his own someday so he worked hard and eventually moved to stocking shelves at $8/hr and would get bonuses for helping elsewhere in the store. At this rate, Charles was able to afford to live in one of his father's rental properties.
Edward was very wise when it came to exploiting his rentals. In NuState his rentals averaged an income of just $500/mth, but that was more than enough to cover his cost. As he expanded his rental property business, he began hiring some of his own tenants to perform maintenance tasks at all of the properties in exchange for lower rent. As there was no income tax in the state, no laws were being violated and he was free of the paperwork that other states required of their employees.
NuState is not a Utopian state. In fact, it was the way the world worked until the early 20th century. Very few people were ever left behind by this system because charity was handled by individual people who took it upon themselves to look after those people that were truly unable to look after themselves.
While these examples certainly do not cover all aspects of each area, the general idea of how each one works can certainly be ascertained. Minimum wage kills jobs for those who lack the skills to earn the minimum wage. It also drives up the cost of living for the lowest rents in the marketplace forcing those who truly are unemployable to be unable to afford shelter. Wage Subsidies are pretty much similar with regard to the effect on housing costs, but fewer people are truly unemployable and the tax burden is lowered for everyone. A system of no wage minimums requires deregulation in housing to work as well as described. People who have no skills must be allowed to earn a wage and rental spaces will be built or modified to provide minimalist living requirements.
Unfortunately, this problem isn't going to resolved with common sense by getting rid of minimum wages and moving first to subsidized wages and later to no subsidies. In the meantime we must rely on groups like GivemShelter.com who are developing profitable and sustainable ways for charitable groups to assist the homeless.
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