Posted by: John Vandivier | February 13, 2013

My Thoughts on Raising Minimum Wage

A friend of mine, an intelligent one at that, recently posted on Facebook that he would raise minimum wage. He said he would do this because there are many poor people and their income rises very slowly. I didn’t even address the problem that the term poor is a nearly useless designation. Instead I went straight to why raising minimum wage is a bad idea. Here was my response:

“Raising minimum wage would hurt the poor. Furthermore your numbers don’t reflect decreasing costs of living and the effects of the negative income tax (Earned Income Tax Credit).

Right now a grocery store will pay a cashier with 3 years of experience about $10 per hour. Let’s say we raise the minimum wage to $10 per hour. First of all many stores will close. The increase in supply of experienced cashiers will prevent any of the poor from getting jobs for a few years. Once all of those experienced cashiers move on to other jobs or die or what have you eventually the opportunity will be for the poor to take those jobs. However, because fewer grocery stores can thrive with such high input costs, less jobs will be available. Additionally, those stores which do survive will try their best to pass on costs to consumers. Lastly let’s be honest. A cashier with years of experience usually does a much better job. So what you have done is temporarily displace many workers and hurt the economy only so that in the end prices will on average rise and the service will on average be worsened – and you have destroyed many real job opportunities in the process, effectively increasing the unemployment rate long-term.

The poor need a good education. That will improve both their ability to make life decisions (such as maybe I shouldn’t have more kids when I’m already poor – education is the leading driver of reduction in birth rate in women) and will also lead to higher wages due to higher productivity, not artificially higher wages which will lead to artificially higher market prices without any improvement in quality.

Your point about single parents not being able to get educated is also wrong. Historically it has been true, but due to technology that is no longer true. Single parents can get online degrees which work around their schedules and, if they are truly poor, they are often paid to pursue those degrees due to the availability of financial aid including tax credits. I myself was paid to go to school before transferring to UH because of such circumstances.

Such online classes can be taken on free-use computers at a local library, or, if a computer must be purchased, it is not a huge issue because 1) costs of computers have dropped 90% in the past 10 years and 2) the costs are fully tax deductible.

Lastly we need a fundamental shift away from Daddy Government. The government increases the cost and decreases the quality of everything it touches including food, medicine, education, housing, energy, transportation and more. We need a minimal power government or perhaps even no government.”

I was quickly responded to by one of his friends who said, “Because every other time the minimum wage was raised bad things happened – not.”

I quickly responded with, “They have. Look at how illegal aliens are taking over the jobs of the poor. This is in part because they can accept sub minimum wage jobs. You are completely out of touch with reality. You are so out of touch it wouldn’t surprise me if you said something stupid like “Illegal aliens don’t take jobs from Americans” or, dumber yet, “They’re not illegal they’re just out of status.” Have an article http://www.fairus.org/issue/illegal-aliens-taking-u-s-jobs.”

Also I feel that there is a certain feeling among people that profit motive in a market exploits the common worker. Its a classic “us vs them” and “worker vs businessman” story. Here is a video to put that idea to rest. It shows that capitalism does not exploit the common worker:

Certainly this discussion wasn’t a full answer to a complex question but I think it has been fairly good. I’ll leave it with a video which further directly addresses the impacts of a minimum wage increase:

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