A new "Raise the Wage" wave has been sweeping the country recently. In California, lawmakers passed a deal to increase the wage to $15/hour by 2022. Seattle passed a similar bill in 2015, and the evidence points to a possible negative impact of such a large increase. So, why do conservatives oppose artificially high minimum wages anyway?
First, Who Gets Paid a Minimum Wage?
The first assumption of those who want to raise the minimum wage is that these people need their minimum wages raised. But who are these jobs meant for? The week I turned sixteen I started my first job. It was a glorious job that involved walking outside of the largest retailer in the world, collecting buggies, and pushing them back inside. Occasionally, I would help people load items into their cars, too. In full disclosure, this retailer actually paid me 40 cents above minimum wage to start. I met a lot of other people my age here, too. Together, we all went to school during the day and worked at night or on the weekends. Oh, and my mother also had a part-time job at the same place just to make a little extra cash.
At sixteen, I had no bills. Although times are changing if I believe MTV's Teen Mom, I also had no family to support. That minimum wage job was meant for me. It was also meant for my mom who already worked one stressful job and wanted to make a little money on the side doing less-stressful cashier work a few hours a week. Minimum wage jobs are intended to be entry level. You start at the bottom, and then through hard work, start making more money. Minimum wage jobs are not intended to be lifetime careers. They most certainly are not intended to be able to support a full family. Yes, all situations are different. And in the current economy, even these jobs are hard to come by sometimes.
Higher Minimum Wage, Fewer Minimum Wage Jobs
The process-based and emotional plea of raising the minimum wage is easy to do. Oh, so you don't think American workers deserve to be able to live comfortably if they are working full time?. That's what they will say. But economics isn't that easy. It isn't as though the minimum wage is increased by 25% and nothing else changes. In fact, everything changes.
For starters, jobs become fewer. Make something more costly and you get less of it. Welcome to Economics 101. Most minimum wage jobs are not essential jobs (say, pushing buggies from a parking lot) and making them more costly also makes them more expendable. Add to that the recent job-killer was known as Obamacare and pretty soon you won't have to worry about minimum wage jobs because there will be very few left. Employers would rather pay one excellent employee $16/hr with benefits rather than pay two inexperienced entry-level workers $9 with benefits. The net result is fewer jobs as duties are consolidated into fewer and fewer positions. The anti-business policies that started in 2009 have proven this point as by 2013 there were 2 million fewer people working than four years earlier, with the highest unemployment rates being in the young adult/entry level age brackets.
A federal minimum wage increase is also highly uneven as the cost of living in Mississippi is very different than that of New York City. A federal minimum wage increase would disproportionately hurt business in states where everything costs less, but now the cost of labor costs much more. This is why conservatives would prefer a state-based approach as one size does not fit all.
Higher Costs Wipe Out Gains in Income
Not only would raising the minimum wage to reduce the number of available jobs, but it probably would fail to make life “cheaper” for these workers in the long run anyway. Imagine that every retailer, small business, gas station, and fast food and pizza joint were forced to increase the pay of their heavily teen, college-aged, part-time, and second-job workforce by 25%. Do they just go “oh okay” and do nothing to make up for that? Of course, they don't. They either reduce employee head count (likely not making their situations “better”) or increase the cost of their product or service. So while you boost the minimum wage of these workers (even assuming they are the working poor) it doesn't matter much because the price of every product they plan to purchase from other retailers, fast food joints, and small business just skyrocketed to pay for the pay increases. At the end of the day, the value of the dollar is merely weakened and the ability to purchase more goods becomes more expensive anyway.
Middle-Class Hit Hardest
The dominoes keep falling, and now they head toward the middle class. If the minimum wage is flat-out increased - even for teens and second jobbers and retirees who don't need an increase- it does not mean that employers would raise the wages of their middle-class workers who are more likely to be in a career. But just as the purchasing power of the dollar is diminished by higher prices for minimum wage workers, it is also increased for the middle class who are purchasing the same goods and services. But unlike the lower wage workers, the middle class does not automatically get a 25% increase in pay in order to absorb the cost of higher prices. In the end, a feel-good policy could cause even further havoc on the middle class and small businesses, while doing almost nothing to help those who the law was intended to help.