Saturday, June 20, 2015

The Minimum Wage Debate And The Real World

There is heated debate still taking place over proposed increases to the minimum wage at both the state and federal levels. Some are demanding that the minimum wage be increased to an alluring 15 dollars per hour.  Those in favor of a minimum wage hike cite the Congressional Budget Office's (CBO) claims that raising the minimum wage to over ten dollars an hour would "lift" an estimated 900,000 people "out of poverty." The desire to implement a massive (over 106% if the 15$ folks get their way) increase in the minimum wage revolves around the argument that anybody that holds a job, of any kind, should be able to handily support a family on the wages paid by that job. I enthusiastically disagree with that argument. 

 If you choose to spend your adult life as an uneducated and unskilled laborer, don't expect to raise a family in comfort. Who, in their right minds, believes that if you have no marketable skills, you should be rewarded with a "living wage?" I'll tell you who, those that expect a handout (something for nothing) and those that rely on that segment of the population for votes. Granted, the politicians that promise those handouts don't honestly believe that every unskilled dolt deserves a handsome salary, but they'll readily force employers to offer it in exchange for the votes of the habitually needy. What would be the result of lowering the bar in such a way?

In the short term, drastically raising the minimum wage would put more money in the pockets of those that hold entry-level positions, should their employers choose to keep them employed full time.  I propose that in the long run, employers would cut their employees' hours, further increase automation, and pass on the cost increases to their customers.  As a result, those increased costs would offset the increased wages of the unskilled employees, and have an obvious impact on the rest of us.  The same CBO report that claims a wage hike would be a magic cure for poverty also reveals what many of us already knew: Raising the minimum wage would cut jobs, an estimated 500,000 of them.

Economists' opinions on the effects of large increases to the minimum wage differ, as one would expect.  Let's face it, calling economics consistent is like calling Bruce Jenner a woman.  Gather ten economists in one room, ask them all the same question, and you'll most likely get ten different answers. 

Should there be regular increases in the minimum wage?  Yes, but they must be reasonable, and based on the increases in the cost of living.  A 106% increase is not reasonable, no matter how much those in favor of it shout and stomp their feet. 

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