On July 24, Congress will raise the minimum wage to $7.25 an hour from $6.55. And all the teenagers working at Cold Stone say in unison, “Hooray!” Not so fast.
It reminds me of the day after President Obama won the election last November. I was riding a DC bus on my home when I overheard a conversation behind me. My fellow bus riders were jubilant about what occured that week. “This is going to be the greatest thing that ever happened to this country,” one man said to the people sitting with him, their heads nodding in agreement. “Obama’s gonna change things for us. He’s gonna raise the minimum wage up to thirteen dollars an hour, gonna make things better for everybody.”
This, I would venture to guess, is the thinking of many well-intentioned people who would vote for a government-forced wage increase without understanding whyit will put them out of a job by the end of the month.
Economist Peter Schiff explains it best:
The only way to increase wages is to increase worker productivity. If wages could be raised simply by government mandate, we could set the minimum wage at $100 per hour and solve all problems. It should be clear that, at that level, most of the population would lose their jobs, and the remaining labor would be so expensive that prices for goods and services would skyrocket. That’s the exact burden the minimum wage places on our poor and low-skilled workers, and ultimately every American consumer. Since our leaders cannot even grasp this simple economic concept, how can we expect them to deal with the more complicated problems that currently confront us?
For a complete understanding of why minimum wage increases only negatively impact the poor, and why unions advocates support them (ahem, it’s not what you think), read the whole thing.
4 Comments
July 15, 2009 at 11:20 pm
I totally believe the minimum wage should be totally eliminated in my opinion. The reason I say this is because the minimum wage is a poor man mentality and idiotic. I am sick and tired the government trying to control all American citizens because all they care about is power. Also during our current recession, the increase in the minimum wage will continue to hurt business. However I’m sure the big business can use it as some type of tax write off. I wish I was more optimistic about this country.
July 16, 2009 at 9:38 am
Politicians playing with economic models is like a child playing with fire in the middle of a living room- the child is fascinated by the flame and visually recognizes the energy output, but doesn’t see how he(or she) might burn the house down for the entire family as he plays.
July 20, 2009 at 8:53 am
It is unfortunate that the minimum wage is going up. I’m a small business owner (very small). My employees are estatic that their hourly wage is going up. However, what they don’t know yet, is that I’m cutting hours. Their workload will be increased and their take-home pay will be almost the same. It will be that or raise my prices. (which I’m sure is coming very soon)
August 26, 2009 at 9:24 pm
Basic supply and demand curves explain minimum wage but normally low wage employees haven’t taken economics. Subsequently, politicians use terms like “living wage” to buy votes of the uneducated.
A quandary is born…