Minimum Wage: a Misguided Theory

On April 4, 2016, California Governor Jerry Brown signed into law legislation that would incrementally increase the California minimum wage to $15 in 2021. Proponents of this legislation, among them San Francisco Mayor Ed Lee, have argued that this so-called, “fair wage act” is the solution to closing the wage gap in the United States. The raising of the minimum wage has been thrust into the national spotlight with Secretary Clinton in her quest to appease the radical left having publicly advocated for a substantial increase in the minimum wage to $15, the amount synonymous with the struggle of workers who lack the specialized education to succeed in our current workplace. The minimum wage is an example of gross government overreach and is a futile effort to combat American capitalism.

America is built on capitalistic values; the struggle with communist regimes during the Cold War solidified the United States’ commitment to protecting its free market economy. This is highlighted by letting the economy determine its own price for goods. For example, the government does not regulate the price of food, and the price of the product stabilizes to a point where both the producer of the good, the farmer, is comfortable with selling the good for that price, and the consumer will pay that money for the good. If the farmer raised the price of the good to a point where the consumer would no longer purchase the product, the farmer would have to lower the price of the good against his own financial interest in order to sell his food. An analysis of this situation lends evidence to how wages in the United States would stabilize without the needless government regulation that is is the minimum wage. If an employer offered a wage well below what is currently the average, a smart worker would decline the job. The employer would then be forced, in order to maintain the operation of his business, to raise the wage of the job position until somebody accepts the job at the wage offered. Therefore the job would naturally stabilize at an amount that is accepted and agreed upon by both the employer and employee. The average wage for McDonald's workers in Norway ranges between $16 and $25. Norway has no minimum wage, and these wage increases are a result of negotiations between the company and its workers.

The national minimum wage was first instituted in 1938 by Franklin Delano Roosevelt and has steadily risen to its current level of $7.25.

The national minimum wage was first instituted in 1938 by Franklin Delano Roosevelt and has steadily risen to its current level of $7.25.

The futility of the minimum wage is primarily due to the nature of our economy. Prices are not regulated by our federal government so prices will fluctuate depending on the expenditures of the company. If the price of labor is increased as a result of government regulation, the overhead of the company will increase. To avoid a loss of profit, the company will be forced to increase the price of products to compensate for the increased expenditures.

Matt Zell, a sophomore at Burlingame High School, echoed this concern when he stated, “the minimum wage is futile as companies will raise their prices and therefore the increased income of the workers will not impact their power as consumers.”

Additionally, an increased minimum wage is the cause of decreases in employment opportunities. Lower wage jobs provide people an opportunity to gain experience in the workplace. A minimum wage discourages employers from offering these opportunities. President Obama’s response to unemployment in American Samoa in which he delayed a wage floor increase in reaction to a rise in unemployment is evidence of the detrimental effects of the minimum wage. The people most impacted by this are young people, specifically high schoolers who are not eligible for jobs that require specialized training. Higher wages deter companies from offering valuable low wage jobs to students that allow them to gain experience in the workplace. This type of job experience that students gain is key in helping them become ready for future careers. The minimum wage makes it difficult for companies to offer positions as, under the minimum wage regulations, they are forced to pay more. Ultimately, the minimum wage is a motivator of unemployment and makes it difficult for people to find low-wage jobs that provide them with job experience, and for some an income on which to live.

The minimum wage is an example of gross government overreach that is detrimental to the people it aims to help. Although in theory, the idea of giving people more money appears empathetic, the continuation of this regulation in the United States in the face of economic research that disproves it, is only to produce votes from low-income workers. The minimum wage is not only unnecessary and is in conflict with America’s commitment to capitalism, but it decreases employment opportunities for the people that legislators are trying to help.

Posted on November 10, 2016 .