Health & Fitness
Cruel Irony: Minimum Wage
Minimum wage is popular and well accepted, but what does it actually do?
Governments do not set wages. We are a free country, and wages are set by agreement. The employer and employee agree on hours, conditions, and wages. If either does not like the arrangement, it ends. Employers are free to hire and fire. Employees are free to go elsewhere.
Minimum wage law does not raise wages. It makes low wage jobs illegal.
How could that possibly help the poor? The irony is thick, because the very people who need low-wage jobs, those at the bottom rungs on the economic ladder, trying to build reputations and job skills, are the ones cut off by minimum wage.
The idea is that employers will all raise wages for those low-wge jobs to the minimum, so the employees in those jobs will all benefit. However, we know that's not the whole story. Some employers on tight labor budgets will be forced to hire fewer workers, or give employers at the higher wage fewer hours. Some businesses that depend on low-wage workers simply can't afford higher wages, and will have to shut down, or find some other way to get the jobs done. At a higher wage, there is greater incentive to replace employees with machines, if possible. Machines don't go on strike, and don't require benefits.
There is an article in the Huffington Post by Douglas Holtz-Eakin about minimum wage that adds relevant statistics and a few more ironies. For instance, many of the workers at minimum wage are young people in households with substantial incomes. In that case, Minimum wage serves to redistribute wealth from the poor who buy goods and services from those low-wage businesses to the relatively well-off families of these young people.
As with many government "solutions", the promises and the reality of minimum wage law are far apart. Minimum wage is one of the worst, as it increases unemployment for the very people it purports to help, while redistributing income from the poor to the well off.
A minimum wage hike is often referred to as a "youth unemployment act", because that's the net effect.
Governor Dayton and legislative leaders have hinted at a push to substantially raise Minnesota's minimum wage in the upcoming 2014 session. Let's not do yet more damage to our young people with this misguided policy.