Paul Campbell, West Fargo, Published April 21 2014
Letter: Minimum wage hikes hurt those they’re meant to helpMinnesota recently passed legislation raising its minimum wage to $9.50 by 2016 compared to the federal level of $7.25. Also, President Barack Obama has proposed raising the federal level to $10.10 per hour by 2015.
Once again, these policies may have good intentions, but the means and results are a different story.
Let’s take the means. Raising the minimum wage is essentially another form of wealth redistribution, something that Obama clearly indicated was his intention during his 2008 campaign. In order to redistribute wealth, you must first take from someone who has it, and use force if necessary. His source is who he referred to as “the rich,” which is, of course, a very subjective term. The good in that is highly debatable, one of economic and moral philosophy deserving of its own article.
Let’s take the results. The minimum wage comes down to simple economics. When you raise the price of something, the demand for it goes down. Therefore, when you raise the price of labor by raising the minimum wage, the demand for labor goes down. That means a restaurant owner who employs 10 people and worriedly stares at a slim profit margin as it is would have to pass those costs on to his or her employees or customers, or sometimes both. That means letting employees go or raising prices.
In the end, it is the poor, middle class and small businesses that suffer from fewer jobs and higher prices. The Congressional Budget Office estimated that an increase to $10.10 an hour would result in a loss of 500,000 jobs. That begs the oversimplified and uncomfortable choice of having someone earn $7.25 or nothing. Therefore, the very people who proponents of a minimum wage increase intend on helping suffer the most. It paints the picture of a negative result stemming from a positive intention, which is frequently the case with government intervention in a free-market economy.
In a perfect world, no one would live on the minimum wage, especially a breadwinner of a household. The minimum wage equals a little north of $15,000 a year, which is undoubtedly classified as poverty. However, they are rarely the breadwinner of the family.
In 2012, the CBO stated that 2.8 percent of the population made the federal minimum wage. Of that group, more than 50 percent were between the ages 16-24 and 64 percent worked part time, seemingly high school or college students at a summer job. Also, more than 50 percent of that group worked in the hospitality sector, often earning tips to supplement wages.
Raising the minimum wage can also make entry-level jobs more scarce for these young people, where they learn the practicalities of work and value of earning a dollar. Jobs that pay minimum wage are sometimes even difficult to find. Eventually, employees refuse to work for such little pay, and employers are forced to increase it. That’s the way it should be. The market essentially eliminates the minimum wage and sets one based on supply, demand and the cost of living.
The minimum wage increase in Minnesota will assuredly result in more jobs swimming across the river into North Dakota, the modern-day model for economic opportunity in the United States. The solution is to ease the burden of government regulation on businesses so they can expand, leading to more jobs and higher pay.
So what’s the point of raising the minimum wage? It’s so a politician can say his opponent voted against it. It’s to use the poor and middle class as a political ploy. For a country branded as the land of opportunity, we’re better than that. Raising the minimum wage is minimum thinking. Let’s think bigger.