1Declaration: Free Markets, Free People, Free Minds

I have noted this before but it is worth mentioning again. Minimum wage is an evil program designed by socialist politicians to buy the votes of unknowing and kool-aid drinking voters who will believe anything you tell them without questioning the repercussions of the governments actions if they seem beneficial enough. Let's think about this for a moment.

The government decides that people who are among the lowest income earners in American society deserve to earn more because life is too hard on them and they can't get the things that they want or need so they decide to raise the minimum wage like they have recently. The lowest earners now earn more and can afford more or at least that is the idea. What could be wrong with this?

Minimum wage is an artificial level designed by the government that does not base the quality of the persons work or the strength of their personal value in determining their wage. This consequentially hurts the companies ability to hire labor at a reasonable price with regards to the employee has to offer. Additionally there will always be some sort of minimum that will be accepted by the employee. If a company is offering $1 an hour and another is offering $2 for the same position the company offering $1 will be forced to increase their wage or be forced to take the lower quality employee who will accept that job at that price. Wage's if left to the free market will sort themselves out to what society and employees are willing to accept.

Examining basic economics will tell you that if you increase the cost of labor the cost of the product will increase, the company will have to take a hit in profits, or the company will have to cut costs. All three of these are detrimental to lower income earners in America. Keep in mind that only less than .55% of income earners in America actually earn minimum wage and a solid plurality of those are teenagers whom are still in school and dependent upon their families (I'll get back to this point).

Increasing the cost of products will increase the cost of living further hurting the lower income families and those who are unemployed, not to mention making life more difficult for those who already earn over minimum wage but do not get a raise to cover the difference of the minimum wage increase. A company is not likely to take a hit in their profits. Why? Afterall, to most of the Left profits are evil. Profits allow the company to expand their business allowing for further job creation. It takes wealth to create wealth something the government cannot do. The third option is the most prevalent and can be seen in the latest job reports with a jump in unemployment among low income earners and teenage employment after the new increase in minimum wage.

The quote below by Milton Friedman has been highly researched as I have pointed out in previous articles. Government statistics clearly show that when minimum wage increases teenage and black jobs have decreased to be able to afford the artificial wage increase that was not deserved.

Keep in mind the more sinister aspect of minimum wage increases that is not mentioned often and the primary reason for minimum wage increases. Unions. Many unions accross the country have their wages directly tied as a factor of minimum wage. Unions are a special interest group of the left and are a direct cause relating to jobs leaving this country.

Minimum wage is not a matter of care for the lowest wage earners in America. Minimum wage increases are a political tool designed to garner more power from the least understanding groups of people in America to enslave them to the political Left.

Get ready for more layoffs next summer as minimum wage increases again. To view the detrimental effects of minimum wage increases in qualitiative data please check this article out.

Today marks the second set of three minimum wage increases due to last years Democratically pushed Fair Minimum Wage Act. Today's jump increased the minimum wage to $6.55 and hour. The third set of increases will occur next July (2009) to $7.25 an hour.

Minimum wage is a contentious issue. There are two competing thoughts in the matter. The first is made by Democrats in order to garner more votes from the poorer classes in society spewing rhetoric how these people have given an unjust situation in life. The other group stands on principle on the facts that demonstrate that minimum wage has a detrimental impact on economic and job growth.

Economic Results of Minimum Wage Increase

A study carried out by Dr. Josephy Sabia of the University of Georgia for the Fiscal Policy Insitute presents clear evidence to the detrimental impacts of minimum wage increases especially among low-skilled and entry level workers. It should be noted that the information from this study was obtained from government data from 1979 to 2004 related to retail and small business employment. Keep in mind today's increase was 11.96% and 19.8% since the act has been passed. After the final increase minimum wage will have increased over 27%.

For every 10% increase in minimum wage, it will lead to the following:

1. Retail Employment

• .9-1.1% decrease in employment
• 2.7-4.3% decrease in employment among teens
• 5% decrease in average retail hours among all teens
• 2.8% decrease in average retail hours among teens who remain employed

2. Small Business Employment

• .8-1.2% decrease in employment
  
• 4.6-9.0% decrease in teen employment
• 4.8-8.8% decrease in average hours among teens

If you would like to view an entire list of negative consequences of minimum wage increases with studies visit here Talking Points from the Joint Economic Committe of the US Congress from 1995. The list includes impacts from reduction of employment opportunities amongst unskilled workers, hard impacts on the black community, increase in job turnover, harder times for lower wage workers during economic downturns to detrimental effects on lifetime earnings, reduction of fringe benefits, and increase in welfare reliance. This is a great list that gives specific studies that can be reviewed if you wish.

Other Economic Impacts

Some would then ask why politicians would even consider raising a rate that affects primarily teenagers who remain dependent to their parents and around .5% of total employment. The answer is the power of unions. The Democratic Party has been corrupted by the detrimental impacts of unions. Unions generally negotiate wages directly towards a factor of the minimum wage. Taking the current number of $.70 and doing some simple math we can demonstrate. A factor of 2 will increase wage by $1.40, 3 by $2.10, 4 by 2.80, and so on. This as you can imagine will have to result in an increase in price among the widgets (general term for a miscialneous product) that the widget factory creates.

One aspect of increases should be mentioned. Take the impact of a person who made $6.55 yesterday. This was $.70 above minimum wage at the time and above lower level employees. To maintain the same standard of living because of the increase in cost in consumer goods and services that employee's wage would have to increase as well, which is up to the discretion of the employer. This will have a negative impact on that employee and many others who will have taken in effect a pay decrease with the mandatory increase in minimum wage.

Companies will seek to maintain their profit. In order to do this they must do one of several or combine several aspects. 1) Move jobs to less regulate areas (overseas). 2) Decrease employment (usually the first step). 3) Increase modernization efforts to decrease reliability on people in the production of their product. 4) Increase the price of their goods. All of these will have detrimental impacts on the American economy by moving economic investment into offshore markets, decrease job opportunity especially amongst low-skilled or low educated workers, or decrease the purchasing power of other workers who did not receive a corresponding raise by artificially increase the price of their goods.

For other economic impacts which I will not cover here to save space view this Joint Economic Committee Report in 1996 that points to the job decrease of nearly 625,000 jobs mainly at entry level when minimum wage was increased from $4.25 to $5.15. The report also cites many other negative impacts of the increase.

Conclusion

Companies pay their employees as a compilation of many different characteristics. Some jobs like a burger flipper are inherently by their nature require less skill and can be filled by a greater segment of society making these jobs easy to fill and less valuable earning the employee less income. Artificially elevating the income of these employees by governmental regulation will require cuts in other areas of buisness to maintain the profit margin or increase prices.

Quite simply companies will pay people what they are worth and their is a reason why those making minimum wage are earning what they are. They have made poor personal choices that have placed them in the situtation by neglecting their education/training, having children they could not afford, spending money on unnecessary items like cigarettes, alcohol, or the latest technology, or by acting in a manner that does not reflect well upon them-self and the potential company that might hire them.

Wage's if left to the free market to decide will be adjusted to what society and individuals are willing to accept. An employer who pays $1/hr for an employee may not be able to find a person to fill this position or at least the quality of person they desire while an employer who pays $4/hr will be able to. If an employer does not pay enough the job will not be filled requiring the company to increase the wage until it is acceptable.

Artificial pay increases such as minimum wage do not have a net positive impact on any groups with the exceptions of those who negotiate their salary as a factor of minimum wage like labor unions. When a politician says minimum wage increase it is not meant to benefit those making minimum wage. It is a tool used to pander to lower income families for increase power and job security in the form of votes, nothing more. Either that or they are beholdent to the special interests of labor unions. Either way they do not deserve the vote of Americans.

More layoffs are coming. Let's hope its not your job!

Sources

Fiscal Policy Institute: The Effect of Minimum Wage Increases on Retail and Small Business Employment
Minimum Wage to Jump by 70 cents Thursday
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Joint Economic Committee Report: The Case Against a Higher Minimum Wage
Joint Economic Committee Talking Points: 50 Years of Miminum Wage Research