President Obama and his statist supporters propose to increase the “minimum wage”—arbitrarily mandated pricing of labor imposed on employers by federal law. In my opinion, the intended result is to further distribute wealth by force; not just unrealistically and destructively idealistic, but an immoral act.
In Chapter XI of his book “Capitalism and Freedom,” the late economist Dr. Milton Friedman discusses the “egalitarian sentiment” of social welfare programs and how their actual effects differ from those intended. Dr. Friedman writes: “Minimum wage laws are about as clear a case as one can find of a measure effects of which are precisely the opposite of those intended….”
In my view, the “hope” and “change” of legislating a minimum wage assumes the false premise that low wages cause poverty. But “their effect is clearly to increase poverty,” writes Friedman. Thus, unemployment increases. Why? Because employers won’t hire people whose skill levels fall below the value of required pay. It’s not only economic reality, it’s common sense.
As Dr. Roy Cordato with the John Locke Foundation writes, an employer’s decision to hire someone is based on the “value of the productive output of the potential employee (being) greater than the cost of hiring him.”(link) That’s an economic principle that influences business practice; meddling mandates interfere with freedom resulting in damages to all parties.
Dr. Cordato writes that: “Low wages define poverty they do not cause it. Wages, like other prices, reflect underlying realities.” Low wages in an open market indicate that some people don’t’ have the skills to be able to earn a higher wage. However, many young and unskilled workers are willing to accept relatively low wages expecting that they can move up in pay scale as they get experience. Further, business owners help them with valuable on-the-job training.
Cordato notes that the proposed $9.00 per hour Obama minimum, including other mandated labor costs, will probably cost employers closer to $12.00 an hour—curtailing the opportunities for those that statists assign victim status, the “most vulnerable”: people lacking education, social skills and job experience.
A minimum wage mandate is unrealistic. In the real world wages reflect the value of employees work, not expectations of an undefinable utopian “living wage.” Nearly all employees start at a low wage and work their way up—few stay at a static economic level. Mandated minimum pay will increase unemployment, reduce the opportunities for young, inexperienced workers and increase the cost of goods and services to consumers; all negative consequences from a bad idea.