Last week the Texas Public Policy Foundation had the honor of hosting an interactive economics workshop for 70 high school honors students at the MOWW Southwest Youth Leadership Conference. This Conference took place aboard the U.S.S. Lexington in Corpus Christi, one of six YLC conferences taking place this summer across Texas. The Foundation also presented at the MOWW YLC meetings at the Central Texas College in Killeen. These high school students from Texas are all top-notch young individuals who were chosen based on a rigorous selection process. 


James Quintero (Director of the Center for Local Governance), Kristen Landry (Research Associate in the Center for Local Governance), and I presented on the differences between capitalism and socialism. To highlight these differences, we conducted an experiment showing the differences between a free labor market (capitalism) and one that the government interferes with by imposing a minimum wage (socialism).


After a couple rounds, the students could see clearly that the average wage increased when there was a minimum wage, but the higher cost to firms substantially increased unemployment (similar to the findings by Congressional Budget Board in their recent report examining the effects of raising the minimum wage from $7.25 per hour to $10.10 per hour).


The last round allows for each worker to be more productive than in earlier rounds. Despite there being a minimum wage in place, there was no unemployment and a higher average wage in this round. The point of the exercise is to show how the government doesn’t have to impose a minimum wage to provide workers with a better wage. It is the determination of the workers to decide what wage they will accept and what wage firms are willing and able to offer.

Workers are able to demand a higher wage by increasing their human capital through education, technical skills, and on-the-job training, which all can be limited when there is a minimum wage.

Simply, wages are set by individuals negotiating together to determine the best allocation of resources. Let firms and workers have the liberty to determine a wage that best meets both their needs without telling them they cannot negotiate a wage lower than a legally binding minimum wage. This reduces the freedom to choose and destroys economic prosperity in the process, noting the benefits of capitalism compared with the substantial costs of socialism.


Everyone seemed to enjoy the presentation while learning that the best path to prosperity is through free enterprise, individual liberty, and economic freedom-the principles we promote here at the Texas Public Policy Foundation. These are concepts that many have never heard. By educating the youth on these important principles, we provide all Americans with a chance to have a better future.