Once again, the call for raising the federal minimum wage is in the news, with most Democratic Party candidates for president endorsing its doubling from $7.25 to $15/hour. Some candidates have suggested it be increased even more, depending on the region of the country.
Of course, this is because of great compassion and empathy for the American worker. Right? After all, who can argue with giving every worker a living wage? Isn’t a wage which considers the increase in the cost of living a right?
On both points, the opposite is true.
Employment is at its highest rate in fifty years, and less than 3% of hourly paid workers receive the minimum wage, yet it has become a major talking point of many running for president. Despite its widespread approval rating among the American people, it is anything but benevolent to the worker or the economy. Though it has been ten years since it was last raised by the federal government, several states have already passed state minimum-wage bills raising it to $15/hour. Others have increased it to a lesser amount. The push to make it a federal mandate is popularly supported by voters from both major political parties. But all that doesn’t equate to it being helpful.
Due to being unable to afford the cost of living in urban areas versus metropolitan areas, a federal increase may disproportionately negatively impact those in rural areas due to the difference in costs and wages. While that is said to be countered by the proposal to adjust it depending on region, even so, small rural industries may still need to adjust (as will other businesses even in urban areas) by the laying off of workers, the closing of some businesses, and higher prices. Relocation and automation also become more appealing to some businesses. Some start-ups might not happen due to being unable to afford to pay workers the state-established minimum.
Whether phased in over time or implemented immediately, the cost of footing the bill for many businesses will result in changes to the workforce in who is hired, fired, and maintained. Ironically, some relatively low-wage workers now arguing for the increase may find themselves without a job. Disabled workers (those now paid less due to being unable to perform tasks as efficiently due to their disability) might also be less likely to be hired if a federal minimum wage removes the current exemption that allows businesses to pay less in such instances.
A minimum wage is not a legitimate right. People have the right to seek employment and arrive at mutually agreeable terms with an employer. But they have no right to exact a state-mandated minimum wage from employers. Thus even if the minimum wage produced positive results in terms of reducing unemployment and alleviating poverty, that would still not justify enacting it into law, at any level of government.
Promising to raise the minimum wage is a simplistic way to curry favor with voters by using the money of other people. It fundamentally violates freedom and ignores the complexity of human action and the law of unintended consequences. The fallacious argument that wages being artificially raised is a net plus ignores its effect on the people who must pay those wages. It also ignores the fact that people whose labor is valued at less than the artificially set minimum will go unemployed.
If progressives who propose an increase in the minimum wage truly believed in the rationales they give for it, then why don’t then propose raising the federally mandated wage to $100 an hour, or even more? Because deep down they know the law of supply and demand will prevail. Everyone whose labor is valued in the marketplace at less than $100 will go unemployed.
Even a centrally planned economy is subject to the reality of the natural laws of economics. Nothing the U.S. Congress does will negate the natural equilibrium of human activity. Legally required costly socialistic mandates for employers already include payment of federal payroll taxes, unemployment insurance, worker compensation insurance, and family medical leave. An increase in the minimum wage will only make a bad situation worse, especially by causing marginal companies to close down owing to additional costs being imposed on them. It would be far better to simply end all government intervention into economic activity, including a repeal of the minimum wage.
A free market is one in which there are no governmental price controls of the price of labor. It is also one in which there are no onerous and expensive government regulations, permits, and licensing, all of which make it difficult to start new businesses and decrease productivity of those that are operating. For a country which exalts the entrepreneur, various governmental units in the United States has made it difficult to become one. How many employees would rather start a small business if only the government did not stand in the way? How many good employees, those who are reliable, trustworthy, and dependable and thus more valuable to an employer, would receive even greater wage raises than they do currently if not for the expense of government intrusion into the marketplace?
Workers’ needs are best met in a thriving nation of private free enterprise, for it is in that atmosphere wages naturally increase. As with so many other problems the government makes, more government intervention is not the answer. Even an elementary understanding of economics reveals as fallacious the idea that government can benefit society by arbitrarily setting the value of any commodity, be it labor or anything else.
A genuine free market would leave people free to establish mutually beneficial labor relationships, which in turn would produce efficiency, innovation, creativity, prosperity, and harmony, all of which would benefit everyone in society.