Reply #68: Wikipedia is usually a useful resource

[Nye Bevan]

Arguments in favor of Minimum Wage Laws

Supporters of the minimum wage claim it has these effects:

Increases the standard of living for the poorest and most vulnerable class in society and raises average.
Motivates and encourages employees to work harder.
Stimulates consumption, by putting more money in the hands of low-income people who spend their entire paychecks.
Increases the work ethic of those who earn very little, as employers demand more return from the higher cost of hiring these employees.
Decreases the cost of government social welfare programs by increasing incomes for the lowest-paid.
Encourages people to join the workforce rather than pursuing money through illegal means, e.g., selling illegal drugs
Encourages efficiency and automation of industry.
Removes low paying jobs, forcing workers to train for, and move to, higher paying jobs.
Increases technological development. Costly technology that increases business efficiency is more appealing as the price of labour increases.

Arguments against Minimum Wage Laws

Opponents of the minimum wage claim it has these effects:

As a labor market analogue of political-economic protectionism, it excludes low cost competitors from labor markets, hampers firms in reducing wage costs during trade downturns,
generates various industrial-economic inefficiencies as well as unemployment, poverty, and price rises, and generally dysfunctions.
Hurts small business more than large business.
Reduces quantity demanded of workers, either through a reduction in the number of hours worked by individuals, or through a reduction in the number of jobs.
May cause price inflation as businesses try to compensate by raising the prices of the goods being sold.
Benefits some workers at the expense of the poorest and least productive.
Can result in the exclusion of certain groups from the labor force.
Is less effective than other methods (e.g. the Earned Income Tax Credit) at reducing poverty, and is more damaging to businesses than those other methods.
Discourages further education among the poor by enticing people to enter the job market.

http://en.wikipedia.org/wiki/Minimum_wage