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Raising the Federal Minimum Wage Would Be Detrimental
The federal minimum wage has been a topic of growing conversation among liberals, including President Barack Obama and Senator Bernie Sanders, whose support for increasing the federal minimum wage can only be seen as economically naive. As an intern who will soon be looking for a job, I must think of the consequences for my fellow teenagers should the federal minimum wage be dramatically increased like Obama and other liberal left politicians are proposing.
In 2007, the Fair Minimum Wage Act increased the federal minimum wage to $5.85. Two years later, the wage was increased $7.25. These recent increases, particularly because they were not enacted by state legislators, have failed to mitigate poverty, as intended, and they have created a more regressive state with higher unemployment among the less-skilled members of the lower class.
Last April, CEO Dan Prince of Gravity Payments, a 120-employee, Seattle-based credit-card processing company, cut his own seven-digit salary and announced a plan to implement a $70,000 annual minimum salary for his employees. He was heralded as a pioneer in the rectification of wage inequality, but the decision is now causing himself to endure significant financial hardship.
In early 2013, the American Enterprise Institute published a report detailing the adverse effects on teenagers of the Fair Minimum Wage Act, which was signed into law. The jobless rate for 16-19 year olds, the authors found, increased from about 16 percent in 2007 to more than 26 percent in 2009. The overall US jobless rate rose simultaneously, from about 5 to 10 percent, so they isolated the effect of the minimum wage increases on teenagers by plotting the difference between the teenage jobless rate and the overall jobless rate.
When the Congressional Budget Office published a report titled “The Effects of a Minimum-Wage Increase on Employment and Family Income,” the non-partisan agency argued that the increase would sabotage many jobs and families. By increasing the minimum wage in jobs where employees are paid for the production of goods and services, the price of those goods will increase. Thus, many families who thought they would benefit from the wage increase are now forced to pay for the higher prices of these consumer goods. The CBO also noted that 21 states had a minimum wage higher than the Federal Minimum Wage which leads many people to believe that the Minimum Wage should be enforced by states rather than the feds.
I decided to ask one of my friends about their minimum-wage summer job. Daniel Ramos, who is a lifeguard at a pool club, surprised me by explaining that since he has no job experience, he would rather earn very little than have no job at all. Ramos’s example can be applied to many other jobs. What he said goes against what many unions want: to increase the minimum wage so they can keep out inexperienced workers and see their own wages rise.
With so much evidence suggesting that raising the federal minimum wage will hurt people like me, and so many economists opposing an increase in the federal minimum wage, I hope those advocating for it will reconsider. The previous increases have already given more power to the unions and future increases will allow them to keep out more unskilled workers. Once raised, it will be very hard to reduce
Are you leaning toward the President’s perspective on minimum wage, or do you believe that the minimum wage should stay the same or be decreased? Do you think this should be a federal issue or are you like many other conservatives who believe this should be a state issue?
Published in Economics
Your argument is spot on.
But I doubt that anyone advocating for an increase in the minimum wage will reconsider. Such advocates are usually Leftists, who are usually as unmoved by facts as they are unmoored from reality.
It would be far better for minimum wage laws, if any, to be handled at the state rather than at the federal level. It would be better still to have no such laws.
The very rationale the left uses to push this snake-oil is “how can someone support a family on a minimum wage income?” Not only do a very small percentage of minimum wage earners support a family on it, but they don’t stay at the minimum wage very long.
The people that really get hosed are the poor and the young. Learning all the important lessons of work is a noble & healthy thing. The young need to learn them to set themselves up for a happy, productive life, and the poor need them to lift themselves out of whatever situation they are in and know that they, too, can provide for themselves.
Put another way, if there was a $15 minimum wage in my city (like is coming in SeaTac and Seattle), my daughter would not have had the chance to earn the money to buy her computer & printer to go to college this fall. She would not have learned the skills and time management habits that will serve her well in college and life.
A minimum wage increase cheats the future in favor of the present, kind of like Social Security (did I say that out loud?). It creates perverse incentives and social stasis rather than social mobility. It hoses the poor in the name of helping the poor. Otherwise, it’s a great idea.
I agree whole heartedly with you that this should be an issue dealt with at state legislatures rather than by the federal government. Also, there are different tax laws state by state so some states may have to have a higher minimum wage than others considering the various laws state by state.
Liberals are clearly trying to punish white people in poor rural regions where the disemployment effect will be greater due to lower nominal price levels. Anyone who advocates a higher federal minimum wage is clearly a racist and should be fired from his or her job immediately, and the phrase “minimum wage” should be banned from all college campuses as code words for bigotry and intolerance.
. . .Or so it would go if black people lived in poor rural communities and white people lived in inner cities. . .
And the argument that the left uses of saying that it is only fair for people to earn a minimum wage is complete non sense that I can easily disprove. To give you an example, many people working inside that credit card company in Seattle who had worked for multiple years in the company were now earning the same as employees who had just entered the company when the minimum wage was increased. When the CEO announced that he was increasing the minimum wage in his company to create a “smaller gap” in wage inequality, he was actually creating a company where there any scent of competition between workers just vanished. This example can be applied to what would happen if Bernie Sanders were to get his way: we would have a country with very little competition in multiple businesses. This argument that the left uses of how many conservatives are not being fair to the lower class if a flat-out lie.
And yes, of course the minimum wage should be a state issue.
Quite right. Those perverse incentives I talked about? Seattle restaurant employees are now telling their bosses that they can’t work as many hours as they would like because they would lose their “housing assistance” that they get from city government. If people think that Seattle can’t become Detroit or Baltimore because we have Amazon, et al., they should remember that high-tech can go anywhere, & most of it up here is across Lake Washington, on the Eastside.
Your argument is absolutely correct. Despite that, I support a higher minimum wage; especially if there is no exemption for union-represented employees.
There are a number of reasons for my position on this; a position which I hold despite the fact that I recognize that a significantly higher minimum wage will hurt poor people and young people. One of my reasons is that a significantly higher minimum wage will discourage employment of illegal aliens, which will discourage illegal aliens from entering (or staying in) the country. Unlike foolish “feel-good” ideas that will never work, like mass deportations or “the fence,” eliminating low wage jobs will effectively remove the incentive for unskilled workers to enter/stay in the country. Eliminating the low wage jobs which are a magnet for illegal aliens is a policy that will work.
I feel bad for the poor people and young people who will suffer as a result of the higher minimum wage. Unlike the lefties who support this kind of stuff, I am not indifferent to the suffering that will result. But the influx of illegal aliens is an existential threat to this country, and I support policies that will put a stop to it.
I’m not sure how much the minimum wage impacts illegal immigration; I am pretty sure that illegal immigrants aren’t lining up at the State Department of Labor & Industries to complain about what they are being paid.
Increasing barriers to work is a terrible idea that chips away at the fabric of the country. The labor participation rate is low enough; we ought not condemn current poor Americans and young Americans to a future where the only job they can get is for $50K per year, and there are 10 people for every job, and the other 9 applicants go on the dole.
Illegal immigration is a very serious matter, but it isn’t the only issue on the table. A minimum wage is at best a very, very imprecise tool. Far better to mandate E-Verify, enforce visas rigorously and make the immigration system more efficient and effective rather that chaotic jungle it is now.
Wages can be depressed by illegal immigrants, but the solution isn’t a minimum wage hike; it’s an education system and labor market that prepares people for good careers & great lives.
Ya think?
A higher minimum wage is definitely counterproductive, but I find it curious that so many conservatives get passionate about the issue to a level they don’t show for corporate welfare such as the Ex-Im bank, Big Bird’s welfare check, and agricultural subsidies.
Ideally minimum wage should be determined at the most granular level possible–the employer.
One of the smartest things I’ve read about wages stated that you’re not paid according to what you’re “worth”; rather you’re pay is based on the effort and hassle it would take to replace you. (As an example, at a hospital it would take considerably more time and effort to find a suitable replacement for a heart surgeon than it would the guy who loads the trays into a dishwasher in the cafeteria).
Frankly, there are a number of jobs that are already being overpaid at $7.25/hr. A $15 minimum wage would only further distort the labor market and provide amenable conditions for corruption to spread, such as paying workers cash under the table (as a tavern in my area was known to do with dishwashers when I was in high school). In such an environment I fear you’d make illegals more attractive to hire, not less.
In a slightly different vein, this post by Moe Lane outlines the interplay between Federal minimum wage and cost of living (CoL) in various locations throughout the country. The gist: areas with low CoL would be hit harder than areas with high CoL (which may be what you want, if you want people to remain in high CoL areas). Good reading for anyone interested in the subject.
I think you have to weigh the negatives. In this case, I think this is more of an employment problem and union problem than a illegal immigration problem
I agree with you. Those issues are just as important as this one I brought up in this article.
The topic of the thread is the minimum wage; start one about the Ex-Im bank, and I’ll tell you that it’s little more than a slush fund for GE & Boeing (and I live in Boeing-land). Plenty of other places to raise capital besides a corporate version of Fannie Mae.
The minimum wage is an issue that reaches people’s minds & hearts directly; if we can defuse and reverse the left’s fraudulent “hold” on the idea of compassion, we take that stick out of their bag & start beating them with it. Conservatism is compassionate; it doesn’t need to be tacked on as an adjective. We’ve just done a terrible job of telling people why our ideas actually work. An increase in the minimum wage is both a symptom and a cause of social immobility. If people understand we both care about the poor and show conservative ideas change their lives for the better, the left will look silly and we will look like leaders. No amount of railing against corporate welfare move the needle on persuadable citizens; show voters that we “care about people like me” without tossing our principles over the side, and they will start to actually listen to us, and vote for us.
There is so much truth in that statement. Many of the cities that have been overtaken by poverty, like Baltimore and Detroit, which are liberal run cities. Any time a liberal says that Conservatives don’t care about the poor, I always point to that example to show them that these liberal agendas don’t improve poverty at all.
I disagree in that you’ll get no traction on opposing the higher minimum wage while corporate welfare is left alone. You can’t treat them as separate issues.
I do agree that compassionate should NOT be tacked on to the word conservative. People who do that are dumb, dumb, dumb and couldn’t get elected village dogcatcher. Try to find a compassionate leftist and you might have a worthwhile project on your hands.
The minimum wage should definitely at most be a state issue. My own state of MT has the second lowest wages in the country, a $15 minimum wage would bankrupt the state government as the majority of state employees make less than that.
Ideally the Earned Income Tax Credit would be revamped, simplified, made practical for a worker, and cheater-checked to serve the purpose of a minimum wage–which could then go back to being the historical $0.00. The law should be entitled The Stop Negotiating Wages Offered/Accepted for Us Act. The only argument against I know is Robert Reich’s latest which says EITC is a wage subsidy. The counter to that is: but of course it is and it should be. It’s just a more explicit subsidy than a minimum wage law and borne by the proper party, the taxpayer. Unhiding the payer(s) is a good thing. It’s called honesty. Reich, as usual, is upside down and backwards.
The tricky problem, of course, is nothing the Federal government does about the problem necessarily binds states or localities from being just as stupid as they want to be. I’m sure the Los Angeles City Council, having the matter explained using small words, loudly and clearly spoken, would say: “yes, fine. $15.50 is the minimum wage. Got it.” Maybe there’s just something about getting into other people’s business that’s irresistible–absent a punch in the nose. I could even see Congress blithely passing a minimum wage law immediately after the Butt Out Act.
“I’d like to help you, son,
But you’re too young to vote.”
Summertime Blues
Seeing the picture in the OP reminded me of a general rule I have – I don’t support any cause that uses a raised fist in their iconography. We had (and still have a few) of those stupid blue fist bumper stickers all over Wisconsin during the fight over Act 10 and the Walker recalls.
Disagree. It should be a local issue. Why should state capitals dictate wages in rural areas?
And GMO labeling should be a local issue, too. Right?
There is a relation between the two?
Yes. They are both a question of subsidiarity. Unless we want to advocate local control only when we think the results will be in our favor and want to call in the big federal units when things don’t go our way at the state and local level.
Disagree with you entirely. You seem to want to take two completely different subjects and link them via an obscure theory to prove a point nobody understands.
Prove it.
It’s your straw man not mine. Burden of proof goes to you.
You said you disagreed me but then that nobody understands my point. Those two statements can’t both be true. Which one are you going with?