briefly, on the folly of raising the minimum wage


Our fearless golfer was in Milwaukee today, carrying the workers’ banner for a minimum wage increase to $10.10/hr, a steep hike from the current level of $7.25.

Arguments like this are red meat quinoa for those of a particular political persuasion, though the overwhelming majority of those of unsaid political persuasion haven’t seen a pay stub based off minimum wage in decades, if ever. In fact, 1.566 million workers make minimum wage, according to Pew Research in findings published last summer. Of those, half are young, meaning that most of them are probably supported either at home or by parents, meaning that this is not some kind of widespread Steinbeckian nightmare.

Not yet, at least.

The problem with raising the minimum wage is not that the price of a Happy Meal would go up, which it would, or that the franchisee would replace workers with touchpads, which she could, and turn every burger joint into a scene from Metropolis, which she should, since that would actually be kind of awesome.

The problem with raising the minimum wage actually has nothing to do with minimum wage earners; it is that raising the minimum wage has everything to do with the rest of us.

If the minimum wage is increased to $10.10, it does not elevate those about 750,000 workers out of poverty, it drags the person making $12, $15, even $20 an hour further into it. If the wage is increased, everyone making $8-10.09, that is, those who currently make more than minimum wage, end up at minimum wage, as well. It’s a step backwards, regardless of how one looks at it. And yes, the law of unintended consequences applies, as the price of everything would increase because an artificial baseline for take-home pay was artificially increased (as are the corresponding tax receipts. Don’t think this is some act of charity. It’s not, and not by a long shot.)

It also devalues those who are currently earning more the proposed minimum wage, in that those people are pushed closer to the aforementioned baseline. I can guarantee that raising the minimum wage will not result in a correlative $2.85/hour raise on either my paycheck or yours, or roughly two-thirds of a quarter-pounder with cheese, which would only get more expensive.

Instead of tackling real problems–amongst which include fiat currency, profligate deficit spending, quantitative easing propping up markets that are an insult to paper tigers everywhere, and wholly unserious politicians of all persuasion$ who have made themselves fundamentally insulated from the laws they foist upon the rest of us–they tout raising the minimum wage…on Labor Day…in the throes of campaign season. A cynical proposal from cynical people during the most cynical time of every other year.

We can have a serious, good faith conversation about the ways which we can better the lot of Americans in poverty or struggling to live paycheck-to-paycheck. I remain unconvinced that raising the minimum wage should have anything to do with it.

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One thought on “briefly, on the folly of raising the minimum wage

  1. The conclusion of the CBO study is that raising the minimum wage would have a modest positive effect to reduce poverty at the very bottom, and a modest negative effect upon prices. Historically, prices increase far less than the wage percentage increase. (They use the “Big Mac” example.) If minimum wages increase from $7.25 to $10.10, a 39% raise that would make the buying power equal to what minimum wage was in the 1960s, the price increase of a $5.00 item would be expected to rise to $5.14.

    There’s no evidence to support massive job losses, since that’s far more dependent upon supply and demand forces than wage levels.

    I agree there are plenty of ways to reduce poverty more significantly.

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