# Prices dependent variable Summary::It is important to understand the buyers and sellers determine prices. # Links To understand the effects or implications of minimum wage you must first understand that, because of the dependent nature of wages (as with all prices), government cannot control wages directly. The ratio between the amount of money and the amount of labor exchanged determines the wage rate. In a free market this ratio is determined by the voluntary exchange between the employee and the employer. The employer determines how much money he is willing to offer for a certain measure of labor. The employee determines how much labor he is willing to offer for a certain amount of money. Wage rates move up and down based on the voluntary offers of employers in the voluntary acceptance of employees. Since money acts strictly as a medium of indirect exchange, the exchange amounts to a specific amount of labor output for a specific amount of labor input. [I have already made this far too complex.] To understand the effects or implications of minimum wage you must first understand that the determination of wages depends on two independent variables: the amount of labor provided in the amount of money paid for that labor. The ratio between these two independent variables determines the dependent variable wage rates. Thus, to influence the wage rate one must change either the amount of money paid or the amount of labor provided. If we assume that the employer wishes to acquire labor at the lowest cost possible, the determination of the wage rate depends primarily on the acts of the employees. If they accept work at a particular wage rate, that becomes the rate for that particular job. If an employer has a particular low-paying position in the worker voluntarily accepts the wage rate offered, and employment contract transpires. The government establishes in minimum wage rate, what they do in effect is to make it unlawful for the employer to offer a job at below that rate and for the employee to accept a job at below that rate. This legislation has the net effect of barring any employee willing to accept a lower rate of pay from actually obtaining a job. Thus, minimum-wage legislation amounts to an employment legislation. All those employees willing to accept low rates of pay are barred from accepting them. When a sufficient number of workers voluntarily accept specific wage rates offered for particular jobs that becomes the market rate for that particular job. To mandate a specific wage rate higher than that determined for the particular job in effect eliminates that job from the marketplace. The government cannot mandate the amount of money available for a particular job; thus, by mandating a specific minimum wage rate they eliminate the possibility of workers accepting jobs below that rate.