Minimum Wage Hurts More Than It Helps

By: Shane

Congress is considering a bill that would mean a couple of tax cuts, including one for the heirs of multimillionaires, in exchange for an increase in the minimum wage. Increasing the minimum wage certainly goes against everything conservatives believe about economics, such as not stifling the economy with ridiculous government intervention.

The thinking behind the bill is that conservatives can pass a minimum wage hike now, and prevent liberals from using minimum wage as an issue to energize voters and get them to the polls in November. As stupid as this is, it looks like it may happen, with many "big-name" Republicans supporting the idea. One has to wonder if it is really worth a few extra votes to hurt the economy? And an increase in minimum wage would certainly hurt the economy.

First, let's look at the flip-side of this bill. Along with the minimum wage increase, conservatives have tacked on tax breaks. Tax breaks are almost always good for the economy. Even tax breaks for the "heirs of multimillionaires" are most likely better than the alternative: the government taking the money, spending a large chunk of it on bureaucracy, and then spewing out what's left at random, destroying the free market's ability to provide economic indicators which lead to a healthy, efficient, and vigorous economy with more of the jobs, services, and goods we need.

Not to mention that tax breaks for the "rich" lead to more jobs. When the rich have more money, they not only spend it, but they also invest it. Tax breaks simply lead to more jobs and a healthier economy. Also, cutting taxes generally leads to higher tax revenues, as fewer people try to avoid taxes and more companies and people come to America.

Minimum wage laws, on the other hand, force employers to hire fewer employees than they need or want, and destroy jobs for low skill workers - also known as "the poor." Wages usually increase for many others when there is a minimum wage increase, since most people think "if he got a raise, I want a raise." Unionized workers often have contracts that base wages on a differential above the minimum wage.

These wage increases across the board may seem like a good thing, but they are not. Employers can not simply say, "OK, Mr. Government, we'll start paying our employees more money." It is ridiculous and ignorant to think that companies can or would absorb the extra costs. Companies either need to raise prices on goods to pay for the higher wages, or fire (and hire fewer) people.

And it probably won't be the middle-class worker in the office or the restaurant manager who is hurt by these effects. It will be the low-skill workers loading trucks and flipping burgers who will be fired. Increasing the minimum wage makes it harder for low-skill workers to find work. Minimum wage hurts the poor, it doesn't help them.

Say you're an unemployed single father of two with no education and very few marketable skills. You're struggling to find a job, but none are available. A local restaurant is willing to hire you as a cook for $4 an hour, and you'd be willing to take the job. But since the government wants to help the poor, they've established a minimum wage of $7 an hour. The restaurant just can't afford to pay you that much, and so you don't get the job, you can't pay your bills, you lose your home, and can't feed your children. See how the government hurts when it's trying to help?

Even if you do keep your job, why should you be happy about a few extra bucks an hour? The increased cost to employers means an increase in the price of goods and services. Employees are one of many expenses that go into making a good. If the price of an employee goes up, than the cost of, say, a burger at a fast food restaurant will go up. Just like if the price of beef went up the price of that burger would increase. So, you may end up with a few extra bucks, but the price of everything you pay for will also increase slightly.

So, what are the effects of this bill likely to be? The tax cuts will benefit the economy, making it run better and possibly creating more jobs. However, most of these tax cuts were already in place, so that won't improve the economy, only keep it from getting worse. Increasing the minimum wage will lead to fewer jobs for those who need them most and more expensive goods for everyone, including those who won't get a pay raise. As usual, instead of helping the poor, the government is hurting them.

Shane is a writer for the conservative news blog UnrestInTheForest.BlogSpot.com. His other articles can be found here.