The minimum wage was raised in 20 states on January 1. President Obama is calling for an increase in the federal minimum wage from $7.25 per hour to something in the $10-15 range.
The mainstream press continues to clamor for more increases as well. A recent Washington Post article is one such example. In it, Danielle Paquette argues, “Economically, the verdict is mixed on minimum wage: Supporters paint the raises as an economic stimulus, a way to reduce poverty; detractors worry budget-strained employers will be forced to cut jobs.” This is a perfect example of economic ignorance.
http://www.washingtonpost.com/news/storyline/wp/2015/01/05/20-states-just-raised-the-minimum-wage-it-wasnt-enough/
Whatever you think about the minimum wage, the economic argument is clear and Paquette is dead wrong by suggesting that there’s an ongoing debate. It can’t be a stimulus because—even if it resulted in no job losses—it simply takes money that would have been spent by one group of individuals and give it to another group. In this respect, it’s a wash at best. It’s an obvious job killer as well. Common sense should tell you that companies required to pay workers more won’t be able to afford as many employees. It’s true that companies typically pass part of the increased costs along to customers, but the overall effect has to involve some number of lost jobs. This is not a debatable point. It’s economic reality.
Michael Saltsman provides a clear, more detailed analysis in the video linked to his recent Wall Street Journal article. He also tells the story of a restaurant in Michigan that closed as a result of the wage hike.
Back to the Washington Post article…Most of it is devoted to stories of several individuals who work long hours for minimum wage. I don’t doubt their difficulties, but these stories miss the point. Wages are determined by the value workers provide employers. Some who receive minimum wage are actually worth less than that amount. Whenever an employer is required to pay a worker more than the market rate, the difference must be absorbed somewhere else. The naïve among us claim that it comes out of the pockets of greedy business owners. In the long run, it’s always passed to the consumer. In other words, the minimum wage is simply a transfer of wealth from consumers to a small percentage of workers. It’s a hidden tax you pay whenever you shop.
Minimum wage jobs are not meant to be careers and for most they are temporary. Most minimum wage workers are not the primary breadwinners in their homes. They provide opportunities for unskilled workers to gain skills and work experience. Those who work hard can move up or move on.
One of the workers highlighted in Paquette’s article even referred to the minimum wage as modern-day slavery. If anything should offend those committed to seeing a global end to real slavery, this is it.
This is heartless. I read the Washington Post article. How can you acknowledge the difficulties of those struggling to make it on minimum wage and not do something about it. Everyone who works should receive a living wage. This would reduce the need for welfare.
j-f
j-foster…did you not read the second to last paragraph? Here’s what is heartless…employers who are coerced into paying wages that are greater than the value of the contribution made by the employee will invest in technologies that eliminate these entry level jobs altogether. Less people will get on the first rung of the ladder or earn that second household income that gets a family out of poverty.
The employer rolls the pay increase on us, the customer, by increasing the product/service price. It does not make a huge difference for us, but it does make a difference for a minimum wage employee, who now will earn $9 per hour instead of $8. We need to let people who work so hard to live in dignity. For many employees, minimum wage jobs are careers. Do you think that the woman who was interviewed to the Washington Post, that works 60-70 hours a week, can find time to take classes to train her for a better paying job? I doubt it.
Aliza-why is it up to society to provide time and money for the woman who works 60-70 hours a week to train for a better job? She’s already getting a ton of taxpayer assistance. I wonder if she finished high school and has the aptitude to do more. She’s made choices and needs to face the reality of the job market. It’s not up to everyone else to face it for her.