The Minimum Wage Fallacy and the Politician’s Dream
Recently, I went to the Farmer's Market where there were young volunteers who were soliciting people to sign petitions to get a minimum wage increase initiative on the next voting ballot.
While talking with them, it occurred to me that they had no idea what happens when the minimum wage is increased.
When the minimum wage is increased in any country, only the entry level jobs get a pay increase. It never precedes an equal pay increase, across the board for all wage earners. Therefore, if the minimum wage is increased to the level of those who have been working in the industry for, say, 10 years, the wage increase does not move the entry level workers up to the status of the skilled workers. Rather, it moves the skilled workers with up to 10 years of experience down to entry level status.
I can assure you that those people with experience do not feel that is fair.
Raising the minimum wage also drives up unemployment and the cost of doing business. Why would an employer hire a new employee with no experience and who he has to train when he can suddenly hire an experienced worker for the same wage?
The price increases of products cause a domino effect. Others who use the product that had a sudden price increase will have to raise their prices to afford the items they purchase and on and on for infinitude. This weakens the value of the dollar. Prices eventually become so high that the buying power of the minimum wage earner is reduced to where it was before the increase. Consumers on every level pay the added price and minimum wage earners, being consumers themselves, feel the effects of price increases, most.
To be sure, businesses are not going to cut into their profit margin. The money that would go toward the sudden wage increase will necessarily come in the form of price increases and labor reductions.
Due to the minimum wage increase, a company that was once using three minimum wage employees, can now only afford to hire, maybe, two. As a result, the unemployment rate increases among unskilled minimum wage level workers.
Thus, raising the minimum wage hurts the very people it was intended to help.
Some of those jobs, where possible, will be shipped overseas.
To compete in a global economy, products in this country must be affordable. Therefore, the hard truth is that minimum wage reduction is a necessary inevitability and the real solution.
Raising the minimum wage is a political trick to make people believe those politicians are helping them. The fact of the matter is that business owners are not going to cut into their own profit margins. Therefore, minimum wage increases hurt low and middle income earners who make up the difference via price increases.
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It must also, be noted here that even if the minimum wage remains constant for several years, it is not the same people who are working at the bottom of the wage ladder. As people learn skills and prove that they are dependable employees, their incomes increase and a new set of young entry level employees, usually of high school age and still living with a parent(s) or guardian, enter the market as minimum wage workers, ready to prove their own value. As it should be.
Politicians argue to raise the minimum wage to get votes while allowing illegal aliens to flood across the border, knowing that the aliens will work under the table for less than minimum wage. This leads to unemployment for those the wage increase was supposedly intended to help and price increases on products those making minimum wage might wish to purchase.
Minimum wage increases only help politicians. It is a politicians's dream.