Economic fallacies seem to be ingrained in the minds of many Americans. According to economically illiterate individuals, so-called “greedy capitalists” would pay each of their workers one cent per hour while raking in massive profits unless we have a minimum wage. Additionally, children would totally be working 12 hours a day in coal mines without the presence of child labor laws. Fortunately, none of these horrific myths are true.
Economic interactions take place when the transaction benefits both parties involved. Workers only earn a low wage when that wage is the highest they can command; children only work long hours when doing so is deemed necessary by the conditions of their environment. Those who know little about economics should keep one thing in mind. Everything the government has comes from its people—it can only take. The minimum wage, like many other policies, “benefits” one group at the definite expense of another. Since it violates individual rights and harms the economy, the minimum wage should be eliminated.
Minimum wage laws make it illegal for anyone to work for less than the government-established minimum. The value of the labor of some members of the workforce is less than minimum wage, so that means these individuals won’t be hired. It may seem like no one is worth less than $7.25 per hour, but minimum wage laws do nothing unless they set a price floor above equilibrium, thereby pricing certain workers out of the market. Everyone should have the right to work for whatever price they want. A job paying less than minimum wage is better than no job at all.
When a business’s cost of labor increases as a result of an increase in the minimum wage, there will be negative impacts. The increase in expenses has to be made up somewhere, so the prices of their products could rise, workers could be fired, non-minimum wage workers could see a pay cut, profits could decrease or the business could even go bankrupt. None of these situations are desirable and at least one of them has to occur—someone has to pay for the artificial pay raise given to the minimum wage workers.
If prices rise, consumers are forced to subsidize low-skilled workers. If a company eats into its profits and higher-level worker pay, shareholders and skilled employees suffer in order to benefit the minimum wage workers. And if workers are fired and businesses go bankrupt, everyone suffers. Minimum wage only benefits workers with minimal skills who see the value of their labor artificially increased and still manage to find a job.
Proponents of raising the minimum wage obscure the truth about the law by making emotional and economically fallacious arguments. They say guaranteeing a fair wage is the right thing to do. They claim increasing the minimum wage would put more money into the pockets of consumers who spend it, therefore increasing spending and demand and boosting the economy. Savings and investment, not spending, makes the economy grow, and minimum wage laws redistribute money from those who save to those who spend. Additionally, there isn’t “more money” in the economy – it’s just in different hands.
Others like to point to the rise in productivity over time and suggest that workers should be paid 20 or more dollars per hour to reflect that. This idea ignores the source of the increase in productivity—technology. That sector reaps the benefits of the increase in productivity, and that’s how it should be. Someone flipping hamburgers is no more productive today than they were in 1960, due to limited technological advances in that field.
These same individuals suggest that minimum wage doesn’t increase unemployment and that corporations should be forced to pay workers a “living wage” so taxpayers don’t have to support them through welfare. These people fail to realize that consumers, who are also taxpayers, will end up paying anyway and footing the bill in the form of higher prices. If they expect corporations and businesses to reduce executive and higher-tier worker pay, they are advocating class warfare and pushing towards an equal-outcome society.
At best, minimum wage is one of many social welfare programs offered in the U.S. At worst, it harms the economy and most of society. Americans need to ignore claims that a $15 minimum wage could come without consequences and instead discuss whether or not we are a primarily socialistic or capitalistic society. While figures such as former President Franklin Delano Roosevelt have been invoked in the fight to raise the minimum wage, our Constitution is founded on the principle of equal opportunity for all, and when we redistribute income and burdens by raising the minimum wage, we unfairly target one group for the benefit of another.
Tim is a freshman double-majoring in finance and economics. Send all comments to opinion@dailycardinal.com.
