The following editorial appeared in the November 2014 print edition of Carolna Journal:

The question — “Who should set the minimum wage?” — and its constant companion — “How high should it be?” — have become staples at political debates during the recent election season, in part, because Democratic pollsters have found significant public support for a measure pushed by President Obama to raise the federal minimum to $10.10 an hour from the current $7.25 — and Democrats have been desperate for an issue to boost their candidates’ flagging popularity.

And while it may be difficult to believe an ideological debate remains over the impact of mandating higher wages on employers, the assumption that government must set the minimum afflicts even some conservatives and libertarians. We heard several candidates from the right side of the political spectrum suggest state government should set the minimum wage and others say that the wage floor should rise alongside inflation or other price indexes.

The fact is, wages and other forms of compensation are set by market forces. But government policies can disrupt those market signals, standing in between businesses willing to hire and workers hoping to be hired.

Employment is a voluntary arrangement between an employer and an employee, who agree to exchange compensation (wages, benefits, education, security/tenure) for “work” (labor, skill, knowledge, expertise). The exchange occurs when both parties agree that the other side is offering a bargain. If the worker demands higher compensation than the employer is willing to pay, or the employer offers wages and benefits that do not satisfy the worker’s demands, there’s no deal. No one is hired. The wage paid is zero.

Government can prevent these voluntary transactions from taking place. The market may set compensation levels, but when governments force those levels higher than an applicant or current jobholder justifies, then the applicant will not be hired and the current worker will see his hours cut or his job eliminated.

Set a minimum wage too high, and workers with low skills and little job experience may never get their first job, and current employees with modest talents may be laid off.

Moreover, wages are hardly the only form of compensation. Obamacare promises to become a new tax on hiring. Under the law’s employer mandate, companies will be forced to provide a government-approved package of health insurance to all workers who put in more than 30 hours weekly. The mandate will reduce employment, as fewer people without jobs will get work and many (especially at the lower end of the wage scale) who do have jobs will see their hours cut and take-home pay reduced.

In February, the Congressional Budget Office projected that, by 2024, the employer mandate will reduce the number of hours worked annually by the equivalent of 2.5 million full-time employees. Those are real people who will lose take-home pay if they can get jobs at all.

The bottom line: Markets set wages and compensation levels, but government policies often determine who (if anyone) gets hired.