At a time when unemployment is at a multi-year high and rising, what do Congress and the President do? Raise the minimum wage, of course. A minimum wage is a bad idea under any circumstances, but to raise it now is a blatant display of political cynicism.
Labor is a commodity and wages are the prices. High unemployment means the labor supply exceeds the demand. It’s like a car dealer with too much inventory raising the prices. It only exacerbates the problem. I know, this is so basic it should be unnecessary to say it.
What about the “living wage” canard? Not every job needs to be able to support a household to have value. The lowest paying jobs are entry points to get people started up the job ladder or a source of supplemental income for low skill second earners and pensioners or teenagers living at home.
The minimum wage is the reason we already have such high unemployment among the young and minorities. You can not make a persons labor worth more to an employer simply by raising the minimum wage. All it does is raise the bar preventing that low skill or entry level person from getting an opportunity to climb that economic ladder.
The minimum wage (MW) is the government telling a person that he/she may not sell his/her labor for less than the government-mandated price, now, $7.25 per hour. If his skill level is such that no one will pay him that much, tough. Is it any wonder that so many young people turn to crime? Stupid government policy makes crime a rational career choice for many.
Another argument one hears for the MW is that it gives people more money to spend. Nonsense! It redistributes money, giving those with jobs a little more, but causing others to lose their jobs entirely or be less likely to find one. Plus, as market conditions permit, employers, to remain profitable, soon will pass on the increase in the form of higher prices. So people with jobs may be slightly better off for a short time, but everybody else is worse off. It is, in effect, a regressive tax.
Politicians, even as stupid as many are, know this. But they do it anyway because it is “feel good” policy that plays well with the average voter and because it is another payoff to the unions. I know, union workers don’t get MW. But when the MW goes up it eventually pushes wages higher all the way up the scale. Many union contracts even have clauses triggering a raise whenever the MW is raised.
The result of the new MW increase, especially coming during this period of rising unemployment, will be even higher unemployment, especially for the young and unskilled.
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