Minimum wage hikes fail on all fronts

Minimum wage hikes fail on all fronts

February 19th, 2013 in Opinion Free Press

Some public policy issues are tough. People on all sides of the topic make valid points and there is no absolute, verifiable correct answer. No better or worse. No right or wrong.

The minimum wage is not one of them.

The concept of a minimum wage itself is sheer economic lunacy. Proposals to hike the federally imposed price control on labor are preposterous. That's why President Barack Obama's proposal to increase the federal minimum wage to $9 an hour from its current $7.25 is so frustrating.

A minimum wage makes it illegal to pay someone what their labor is actually worth if that amount is less than some silly, arbitrary amount decreed by the government. As a result, people who would make the least-skilled, least-experienced and, thus, least-valuable employees don't get jobs.

When the government decides to increase its arbitrary minimum wage, smart business owners who care about staying in business more than they care about paying their least-skilled, least-experienced and, thus, least-valuable employees more than they're worth start handing out pink slips.

A recent Ball State University study found that, between July 2007 and July 2009, when Congress increased the federal minimum wage by 40 percent, there were 550,000 jobs lost as a result.

When Congress first passed a minimum wage in 1938, The U.S. Department of Labor found that more than 10 percent of America's lowest paid, lowest skilled workers were canned almost immediately.

"Eighty-five percent of the most credible studies from the last two decades show job loss associated with a [minimum wage] hike," according to the Employment Policies Institute.

Those job losses created by a minimum wage often come at the expense of disabled, young, lower-skilled, immigrant and minority workers -- those who are already the most disadvantaged in the workplace.

Besides firing employees, resisting hiring new people and reducing hours for workers who keep their jobs, businesses also respond to the expense of minimum wage increases by raising the costs of their goods and services.

That leaves low-income workers who are lucky enough to keep their jobs after lawmakers unwisely increase minimum wages no better off than they were before. The price increases that accompany minimum wage hikes mean that, even if some people have more money to spend, their buying power is reduced as the cost of everything from baby food to shoes to furniture rises.

So if minimum wage hikes cause massive unemployment and sharply increase the cost of almost every good and service Americans buy, who wants to see the minimum wage increased? The answer is labor unions.

At first blush, it may seem odd that unions want the minimum wage increased. After all, union employees generally earn well over the minimum wage. It turns out, though, that unions frequently base their wages off of minimum wage rates. The hourly pay of union workers in a large number of jobs in America are multiplied by the minimum wage. Union workers' hourly wages are set at five, six, sometimes 10 times the minimum wage rate. As a result, a $1 per hour increase in the minimum wage can create a $5 or $10 an hour hike in the pay of union members.

While students and the working poor -- the people who most often work minimum wage jobs -- don't vote in high numbers, union workers do. And that's why, despite a mountain of historical evidence that proves that minimum wage increases are horribly damaging to the economy and particularly unfair to the poorest people in America, politicians continue to push for minimum wage increases.

When President Obama told Americans that he planned to force a 24 percent minimum wage increase down Congress' throat, he wasn't proposing a plan that would help the economy. He was actually suggesting an idea that will cost hundreds of thousands of hard working Americans their jobs.

The president wasn't helping low-income people increase their buying power. He was recommending a scheme that would inflate the cost of everything sold in America.

Obama wasn't creating hope for low income workers. He was giving a payback to the labor unions who contributed so much toward his election.

There is simply no good reason for a minimum wage increase. But there are plenty of bad reasons for one.