Politics 101:
Why we shouldn't raise minimum wage.
By Stephen Chretien
In the past few years, the Democratic Party has made efforts to increase the federal minimum wage, which currently $7.25 per hour. President Obama has made it one of his primary domestic policy goals, repeatedly calling for Congress to raise it to $10.10 per hour by the end of 2016. In his State of the Union Address on January 20th, he emphasized the difficulty of living on the current minimum wage, even challenging Congress to attempt it.
President Obama’s proposed $2.85 increase, however, is rather mild in comparison to the demands of some low-paid workers who protested in 190 American cities for a $15 minimum wage last month. Various politicians have also expressed support for a significant raise, like Senator, and potential 2016 presidential candidate, Elizabeth Warren (D-Massachusetts), who also supports drastically increasing the minimum wage. She has asserted that it should be around $22 if the government adjusted to account for current increases in productivity.
If implemented, this proposed increase would have a panoply of unintended consequences on our economy. For one, although it is a genuine attempt to alleviate the hardships of the lower class, it would actually hurt the lowest wage earners, as it would likely squeeze a sizeable portion of them out of the job market. The money to finance these substantial increases would have to come directly from the companies that employ workers at minimum wage, which would invariably lead the companies slashing their employees’ hours or even laying them off completely. These companies often do not have the funds to meet such drastic increases in their expenses. Thus, the unemployment rate would likely rise, and American companies would experience decreases in productivity. The government should let the free market work out wages, as attempted prohibition of certain wage rates hurts both companies and workers.
Furthermore, proponents of raising the minimum wage, including President Obama, often cite the need for all workers to earn a “living wage,” arguing that today’s minimum wage of $7.25 is not enough for workers to maintain financially secure lives. They argue that the minimum wage needs to be based on the cost of living. Because costs of living vary considerably across the country, raising the minimum wage on the federal level would be counterintuitive. For example, the cost of living in New York City is significantly higher than the cost of living in a rural town.
Thus, even if one believes in the need for a government-mandated “living wage,” raising it across the board at the federal level would neither guarantee workers in locations with high costs of living the desired financial security, nor help workers in places with low costs of living. Such high wages would not be sustainable for companies, which would eventually be forced to hire fewer people for less work.
