Monday, March 07, 2005

Just Say "No" to Minimum Wage Increase

The Senate just did, and a good thing, too. We say raise it to $250,0000 per year or not at all. But what heartless person could reject such a worthy cause? The Small Business & Entrepreneurship Council explains:
"Raising the minimum wage is an easy vehicle for political pandering. Politicians don’t have to raise taxes. But, of course, someone pays a price whenever government intervenes in the marketplace with this kind of regulation.

In fact, there are real and severe costs that come with a higher minimum wage. First, small businesses get hit with higher labor costs. That translates into reduced earnings, lower wages and benefits for other employees, and/or fewer resources to expand the business. All politicians say they love small business, but then they call for a higher minimum wage, which hurts small business.

Second, the people that a higher minimum wage is supposed to help get hurt. A higher minimum wage simply prices many inexperienced, low-skilled workers out of the market. Some business owners can replace labor with automation, or certain duties are added to the work done by other workers with higher skills. It also is important to understand that people who earn the minimum wage tend to move up the wage scale fairly quickly. But that process is delayed, if not derailed, when a higher minimum wage destroys jobs. This lost work experience hurts the lifetime earnings of individuals.

All of these ill effects of the minimum wage have been documented by countless economic studies over the years. Indeed, this is one of those rare subjects upon which most economists agree. After all, it’s straightforward, basic economics. Now we only need politicians to stop the political pandering, and instead deal with the ugly economic realities of increasing the minimum wage."
A minimum wage doesn't guarantee anyone a job at that wage. It only guarantees that no one will get a job unless their labor is worth at least that wage.

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