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10 Reasons Raising the Minimum Wage Can Hurt the Economy

Economic Realities Versus Wishful Thinking

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According to the left, raising the minimum wage and providing a "fair wage" is the best way to eliminate poverty and address "income inequality." But doing so has consequences far beyond an employee simply getting a raise on their paycheck one day and that's the end of it. We've already seen the consequences of the poorly thought out, expensive, and lousily executed Obamacare laws and drastically raising the minimum wage the way liberals are proposing could lead to equally unfortunate outcomes for the very people the law is supposed to help.

1. Attempting to artificially raise incomes through a minimum wage increase is more about electoral politics than it is about actually helping people achieve the "American Dream." Indeed, when polled people regularly support such a raise, because who would oppose people making more money? But economics realities are more than what sounds nice, and everyone would be better off by supporting true pro-growth policies that open up opportunities for everyone willing to work for the American Dream, rather than expect it be handed to them. Artificial wage increases can set the economy back while not even finding true relief for those the increase are intended to help.

2. If the goal is to lift people out of poverty, this will not do that. Figure that a huge chunk of minimum wage jobs are part-time, and the number of part-time jobs as a percentage of the workforce are only increasing already because of Obamacare. How many people would rather make $8.50 an hour and work 40 hours a week with a company-sponsored insurance plan over making $10 an hour with hours cut back to 28 per week and left to "shop" at an Obamacare exchange for excessive and costly insurance they might not need? (And even if the plans are "cheap" because of subsidies, the Obamacare deductibles are probably out of reach for these people anyway.)

3. Do this math equation: Obamacare + Higher Wages for Unskilled Labor - Cost to Replace Said Worker with a Machine = Adios jobs. The high costs of Obamacare plus increased wages (which also means higher payroll taxes paid by the employer) makes it more attractive to replace low-skilled jobs with machines. Self-service food-ordering machines are already being implemented in many restaurants nationwide.

4. Minimum wage jobs are typically low-skill or entry level jobs. If the costs to fill low-skill positions become to high, consolidation can occur and businesses are likely to replace two or three employees with one employee who excels and can do multiple jobs quicker. In other words, it would probably be more attractive to hire an ambitious and talented self-starter at $18 an hour to replace 2-3 less ambitious or inefficient employees making $10 an hour each. A business could even pay the one employee some solid over-time and still be ahead in the end. The more an employee is paid, the more is expected of them. Making jobs artificially more expensive also makes employees with less skill or who are new to the workforce more expendable. And these are the people the new laws are intended to help.

5. Believe it or not, the money needed to pay these employees has to come from somewhere. Retailers - who probably employ the greatest percentage or minimum wage earners - would simply be forced to raise the price of goods and services. So even if someone makes an extra $28 bucks a week, how much more are the same workers going to have to pay for food, gas, or clothing to make up for increased labor costs?

6. Different states have different economies and the cost of living in New York is different than the cost of living in Texas. It simply does not make sense to have a one-size plan for completely different economies. This is why, of course, conservatives believe in federalism and believe that Alabamans have the right to live how they want to and Vermonters have the right to live how they want to. Nationally centralized policies rarely work when their are so many factors in play.

7. Many small businesses already struggle to survive with the current burdensome regulations offered up by the federal government. Many rely on part-time help from high-schoolers to scoop ice cream, work the car wash, or deliver flowers. Small businesses are already at a disadvantage as they typically have higher overhead costs and must make more margin on products sold just to survive. This would only make it more difficult for them to succeed.

8. The minimum wage is seemingly raised every few years, and it's never enough in the long run. After all, a minimum wage at $10 is still a minimum wage. And if higher labor costs cause the price of everything to go up anyway, the power of the dollar is merely weakened and no progress has been made. Which brings us back to our first point: The American economy needs true economic growth that enables people to succeed, not a policy based on a bumper-sticker slogan that offers a temporary feel-good fix that will be just as worthless and new minimum wage increase demands roll around.

9. Higher paid employees will want raises equal to those of the minimum wage employees. If people at the bottom of the pay chain get a 20% raise, everyone who makes more than that will also expect - and perhaps rightly so - a 20% raise as well. Imagine having worked in a job for a few years and earned increases only to have some guy hired at the same rate on day one because the government says so. Now businesses either pay all of their employees more or enjoy a disgruntled workforce. In the end, minimum wage increases go beyond increasing labor costs for just the targeted group.

10. This is where the harsh reality sets in: Minimum wage jobs are not intended to enable people to raise a family of five on. They simply aren't. Yes, there are circumstances where people are forced to take jobs at minimum wage, perhaps more now than ever. But minimum wage jobs are designed for entry-level workers, kids in high school (who I'd assume shouldn't have the need for $20K/yr jobs), or those looking to add a little extra money through a second job. The point is to move up from there into intermediate jobs, and with enough hard work a very well-paying job. That's pretty much the point of a minimum wage job, and the point is not to support families. It's nice to say that a full week of work means everyone who does so gets a house, SUV, and an iPhone (and how many struggling minimum wage workers have the last one?), but the reality is that is not what those jobs are intended for. The problem with the left's over-simplified solution to the economy is that the more expensive these jobs get, the more likely those that need them will be able to get them. And how does that help anyone?

 

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