Minimum wage: Solution or problem?

 

Over the last six years, the economy has been in the news almost daily. The housing bubble, bailouts, taxes, Occupy, recession, recovery, too-big-to-fail and healthcare have been buzzwords that fast lose their ability to get the attention of media consumers. One issue, however, never fails to get people to listen: minimum wage. Washington enjoys the highest minimum wage in the nation, $2.18 more than the Federal minimum wage of $7.25 per hour.

There is a national movement for increasing the Federal minimum wage to $10, $11, or even $15 an hour as a way to help Americans deal with the continuing economic downturn. To many, it seems a simple solution that will only help the deserving, but in reality, minimum wage laws hurt those they are supposed to help, and the consequences of minimum wage is apparent in other places that have high minimum wages.

When the price for labor is increased, companies are faced with arbitrarily increased costs that they must make up for somewhere. Executives often take pay cuts but altogether too many businesses have so many employees that the costs cannot be taken out of anybody’s pay, and positions must be cut. Management can be trimmed but the inevitable result is the company must choose to decrease quality of their product or cut the minimum wage jobs that make up their workforce.

While big businesses are able to take the hit, readjust and manage to make ends meet, small businesses operate on razor-thin profit margins as it is already, 10 full time employees granted a $3  minimum wage increase would cost a small business $1,200 dollars per week in increased wages – more than enough to put any struggling business over the edge into oblivion..

In Australia, the minimum wage is about $13  an hour and while the media is quick to portray this as beneficial, it is the Australian young people who suffer. With labor so expensive, companies cannot afford to hire inexperienced work and must go with proven talent that can put out enough work to make employing them worth it. It’s hard enough to get work here, but imagining people working at Safeway for free in hopes that they get hired sounds almost ludicrous. The irony would be comical if it wasn’t sad increasing minimum wage to help young people results in young people working for free, competing for an ever-shrinking number of jobs.

A common metaphor for the job market is a ladder.The young and those working their way out of poverty take on low-paying entry-level jobs and work their way up with that experience, getting new and better jobs in new and better places. Raising the minimum wage is in effect removing rungs from the bottom of the ladder. One of the hardest-hurt by the minimum wage is those living in abject poverty. While  an hour is nothing close to reasonable for a single mother of two, employing the homeless and giving the poor opportunities for earning money outside of panhandling and prostitution is the best way to help them overcome hardship.

It is one matter to consider how many businesses would fail with a minimum wage increase, but how many potential businesses are lost due to the current minimum wage? How many businesses that could exist, be profitable, and employ productive members of society are unable to exist due to the existing regulation?

What minimum wage boils down to is outlawing the employment of anybody whose labor is worth less than the minimum wage, and actual productive employment is the only long-lasting solution to poverty.  If a business doesn’t pay its employees enough, employees will leave and the business will fail. Without minimum wage, businesses will have the freedom to operate how they see fit to employ people and meet the demands of the market, and the freedom to fail and eat the dust should they not treat employees as well as their competitors, Competition applies to the job market as much as it does to any other.

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