Fifteen dollars. Just one Alexander Hamilton and one Abraham Lincoln. So, what’s the big deal? Major presidential candidates, such as Elizabeth Warren, Bernie Sanders, and Kamala Harris, have all pushed for a $15 federal minimum wage. Although I have discussed the absurdity of minimum wage in general, I will now go into detail and explain why a reduced minimum—or at least a halt to any increases of the federal minimum wage—is actually the best way to get people out of poverty.
Note: I will be discussing the federal minimum wage exclusively. Unless stated otherwise, the content of this article will be referring to a federally mandated minimum wage. While I do believe that states and cities can set some minimum wages, I would actually discourage doing so because the ramifications that would occur would expand far beyond the city or state, for reasons that will become evident throughout this article.
One of the most common rationales that oppose an increased federal minimum wage is the loss of jobs. Tim Worstall from Forbes writes that, as a result of an increased federal minimum wage, “there would be very large unemployment effects from such a raise meaning that many people would simply lose their jobs.” (1) He continues to assert that “the actual state of knowledge of the impact that the minimum wage has on employment in North America, and especially in Québec, leads to the conclusion that a minimum wage that is greater than 50 percent of the average wage is harmful to small-wage earners and that a minimum wage that is less than 45 percent has very little risk for this group of workers. Between these limits, the area of 45 percent to 50 percent would represent an increasing danger to employment.” (2)
The fact of the matter is that a federal minimum wage that continues to increase is harmful to both the overall economy and to workers that earn minimum wage. When forced to pay wages higher than what their employees are worth, employers are forced to make a difficult decision: lay off workers in order to maintain a profit, cut their hours, replace the workers with automation, or shut down the business because no other option is viable. These are real-life issues, and sadly, many small businesses are forced to pick the last option because they aren’t able to pay such high wages.
Forbes reports, “While the Raise the Wage Act may have had positive intentions, it could close many small businesses, according to the Employment Policies Institute, a nonprofit American think tank. The EPI launched its own campaign last week called, ‘Faces of $15,’ a website that chronicles the stories of small-business owners throughout the United States who are struggling to keep up with all the minimum-wage increases.”
The article continues: “According to the Small Business Administration, small businesses provide 55 percent of all jobs and 66 percent of all net new jobs since the 1970s in the United States. Twenty-eight million small businesses account for 54 percent of all U.S. sales. In addition, 600,000 franchise small businesses in the U.S. are responsible [for] 8 million jobs. Add to that the real estate component: small businesses in America are responsible for occupying an estimated 20 to 30 billion square feet of commercial space.” (3)
Democrats argue that an increased minimum wage will help in providing a “living wage” to the working class of the United States. However, the Bureau of Labor Statistics would suggest otherwise. Asking the question, “What were the characteristics of hourly workers paid at or below minimum wage in 2013?” notable answers are as follows: “Nearly half were under age 25, 15 percent of employed teenagers earned minimum wage or less, as compared to about three percent of workers over age 25, 65 percent were part-time workers, and 47 percent were in the South.” (4) As is seen throughout all of these statistics, these are individuals that do not need increased wages. Many are teenagers and young adults who will work their way up within that company. Part-time employees, young people and people living in the South do not require higher wages because their costs of living are below average. With experience comes higher wages—it’s common sense—and nobody makes minimum wage their whole life; people are promoted and earn better wages.
Capitalism asserts that two consenting adults can agree on a price to pay each other. Capitalism is NOT extortion. Anybody who says so has a poor sense of how the world works. Just as two consenting adults can engage in sexual activity and not face repercussions, two consenting adults can engage in an economic transaction and agree to a wage that they both see fit. Rather than allowing wages to compete with each other naturally, companies such as Amazon are advocating for an increased minimum wage to phase out competition rather than naturally competing with other companies. Our wages are our time, and our time is our life. We own the wages of our labor and for anyone to confiscate that, is a form of taking advantage.
Forbes concludes, “There’s our cut-off point. Forty-five to 50 percent of the average wage: go above that level and we’re harming low-paid workers (by making them no longer workers), not helping them. And the median hourly wage for the U.S. is $16.71. The proposal for a $15 an hour minimum wage will make the minimum wage 90 percent of the median hourly wage: at which point we know very well that we’ll be harming low income workers, not aiding them.” (5)
Increased minimum wage also leads to another major defect in the market: In order to compensate for increased wages, product prices must be increased. So, just think, next time you complain about the $15 parking fee, if the minimum wage wasn’t so high in Boston and in Massachusetts, maybe, the school could actually afford lower parking costs. Just maybe.
- https://www.forbes.com/sites/timworstall/2013/09/01/the-absurdity-of-a-15-minimum-wage/#6914499e3f44
- https://www.forbes.com/sites/timworstall/2013/09/01/the-absurdity-of-a-15-minimum-wage/#6914499e3f44
- https://www.forbes.com/sites/eshachhabra/2017/05/30/small-businesses-struggling-with-15-minimum-wage-new-site-reports/#218618c811ad
- https://poverty.ucdavis.edu/faq/what-are-characteristics-minimum-wage-workers
- https://www.forbes.com/sites/timworstall/2013/09/01/the-absurdity-of-a-15-minimum-wage/#6914499e3f44