Govt.-Imposed Minimum Wage Hikes are Counterproductive

Businesses Should Set Wages, Not Government

For centuries rational political and economic leaders, including George Washington, have warned against government imposition of wages and/or prices on the private economy.

Now the National Federation of Independent Business (NFIB) has issued a disturbing report on the effects of the significant minimum wage hikes being imposed on businesses by state and city governments in just the last two years. Under the headline Minimum Wage Hikes Are Crushing Jobs in These Cities NFIB reports:

Following minimum wage hikes that kicked off with 2016’s start, Chicago, Oakland and San Francisco have sunk to five-year employment lows in the leisure and hospitality fields. And in Seattle, the loss of 1,000 restaurant jobs followed the state’s minimum wage increase, according to federal data.

In Washington, D.C., a minimum wage increase to $10.50 per hour has cost the city more than 700 food jobs in one year, according to recent evidence from the American Enterprise Institute . Yet, in the four years leading up to the increase, D.C.’s restaurant sector experienced an annual growth rate of 3 percent, adding more than 2,000 food jobs every year.

However, in D.C.’s surrounding areas where wages (were not increased by government action), restaurant employment rates reached an all-time high in 2015, adding nearly 5,000 jobs.

OK, so there you go. And the question is: Why are these increases being mandate if they are so damaging?

And the answer is simple: It is socialism, i.e., government power is used to increase wages through legislation, rather than doing the hard work of creating better jobs and higher-paying jobs naturally through the private sector.

Government-imposed increases also glamorize and aggrandize liberals who propose them. These increases are always reported by Democrats and their media and university friends as an effective way to raise living standards, yet they are actually increasing poverty incrementally, like all of socialism does.

Certainly some people benefit from these hikes, including some workers and liberal politicians. But the overall damage to the economy, to business, to taxpayers, to consumers and to other workers is significant.

More on that further down. First, and since always offers solutions, here are the conservative solutions to increase wages and prosperity naturally:

*Improve the public schools. One of the most significant contributors to low wages are our terrible public schools. Tens of millions of students have not been educated or they have been poorly educated and thus their earning power is limited. These schools are controlled almost exclusively by left-wing government bureaucrats and teacher unions. Yet then the same Democrats say that we need laws to sharply increase the minimum wage.

That is false. We need to improve the schools. But that would be too much work and would interfere with the Democrat gravy train that is public education in America. Liberals simply don’t want to do the hard work of improving education. It might interfere with their easy lifestyles.

*Stigmatize single motherhood: One of the most preventable causes of poverty in the last 50 years has been single motherhood. Single mothers and their children are statistically much more likely than married women to be poor.

Yet who has been encouraging single motherhood for decades? Liberals have. And so they bear responsibility for the consequences. Who has argued fervently against single motherhood? Conservatives have.

*Stop radical environmentalism: Obama has been waging a War on Coal and has been successful – 83,000 high-paying coal mining jobs have been lost since Obama became president. So we do not need new minimum wage laws. We need to preserve the good jobs that we already have.

Rural America is seeing increasing unemployment and poverty not because of low minimum wages, but because every single economic development project from logging to mining to quarrying to pipelines is being immediately and forcefully opposed, and often defeated, by wealthy urban-based and university-based “green” groups allied with the Democrat party.

*Seal the Mexican border: Illegal immigrants are depressing American wages by working for less money than Americans. This is a double whammy since those Americans often go on welfare and so government spending has to rise to support them. The solution is simple: Stop illegal immigration and wages will rise naturally, while government spending will fall.

*Reduce taxes and regulations: Excessive taxation and regulation are thwarting the American economy. Americans are fleeing by the tens of millions to the conservative, low-tax, low-regulation states and are happy there. Even liberals are fleeing their liberal states, like the hypocrites that they are.

Meanwhile here is the bad news about big government-imposed minimum wage increases:

*$15 minimum wage (15MW) represents a 50% to 110% rise in the current minimum wage, which is a huge jump.

*It is crucial to remember that 15MW means that all workers must, by government order, earn at least $15 an hour. This would be devastating to millions of small businesses.

*15MW is another ‘magic bullet’ proposal from the Democrat left that is supposed to solve an economic problem, but will not. After all we have seen rapidly increasing poverty under almost 8 years of Obama, just as we conservatives warned. Yet life was supposed to be much better for low-wage workers under Obama socialism.

*15MW is de facto unionization by government. Yet labor unions have destroyed or prevented the creation of tens of millions of jobs in America over the last 60 years. Now they want to use government to set the 15MW, just as unions themselves artificially set too-high wages for decades, with ruinous effect.

*Many marginal businesses will close since they will not be able to afford the higher minimum.

*Big wage spikes cause significant job cuts outright, and then businesses may slow or stop the hiring of new workers when the price of labor goes too high. This is shown by the restaurant hiring data referenced by NFIB.

*Businesses may be forced to raise their prices to pay 15MW, and this could cause these businesses to lose their competitive edge in the marketplace, and even to close. If businesses raise prices, then the wage increase is simply a transfer of wealth from the consumer to the employee.

*Businesses may decide not to expand in, or they may flee from cities and states with artificially high wages.

*Businesses may substitute automation for workers. For instance McDonald’s might install computers for customer to punch in orders instead of paying counter workers $15 an hour to take orders. Yet these workers are better off employed at $10 than unemployed at $15.

*Teenage, minority and seasonal unemployment rates will spike because employers will not be able to pay, or will choose not to pay 15MW.

*Managers and other workers will take over some of the jobs that will be eliminated or not created because they are too expensive under 15MW. This will increase unemployment levels.

*Employers may reduce or eliminate salary increases and/or pensions, benefits and perks to all employees, including skilled employees, to make up for the higher minimum wage, which generally applies to unskilled or low-skill workers. This will cause unhappiness in the workplace, particularly among more valuable and skilled workers, which are harder to find and retain that unskilled workers.

*If government workers get increases to 15MW it would simply represent a transfer of wealth from taxpayers, i.e., the taxpayer takes a ‘wage cut’ (gets a tax increase) in order to give government workers a wage increase. In California 15MW by itself is expected to cause the state’s tax bill to increase $3.6 billion annually.

*15MW means 50% to 110% more in the amount that the business must pay for Social Security and Medicare, as much as $1,200 per employee annually.

Employers should ultimately decide what wages that they are going to pay, and here is how:

If a worker earns $9 an hour and demands a raise and the employer does not think that the job or the employee is worth more, then the employer should advertise the job. If a suitable applicant is found willing to work at $9 an hour then that applicant should get the job.

Because the economy – the private labor market – is providing a supply of willing workers at $9 an hour and thus there is no natural pressure for higher wages. And under Obama tens of millions of people are desperate for any type of work at any wage. Thus the Obama Depression, and not stingy employers, is holding wages down.

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