Raising the minimum wage will hurt more than it helps
Democrats in Congress have again brought the minimum wage to the national political stage.
Legislation moving forward in the House, the Raise the Wage Act, would increase the national minimum wage from the current $7.25 per hour to $15 per hour in increments over the next five years.
Minimum wage is a highly partisan issue, reflecting the very different ways the two parties view economic reality.
When the Pew Research Center surveyed voters during the 2016 presidential campaign, 82 percent of Hillary Clinton supporters favored raising the federal minimum wage to $15 per hour, while only 21 percent of Donald Trump supporters favored it.
What drives the difference between the parties?
Some would say it’s because Republicans are pro-business and Democrats are pro-worker. Some say it’s because Republicans are for the wealthy and Democrats are for those with low incomes. I reject these takes.
The thrust of all my work focuses on improving the lot of low-income Americans. And I think the minimum wage is a terrible idea.
I operate a business, albeit a nonprofit one. How do I decide how much to pay? I determine what I can afford and then try to get the best people at that wage.
Suppose what I decide I can afford is not enough to attract the kind of person I am looking for. I won’t get any applicants. I’ve got to figure out how I can pay more, or if it is viable to hire people less qualified and hope they will learn on the job.
In short, these are dynamic and highly personalized calculations between a business owner, workers and the marketplace.
How can it possibly work if the government gets involved telling me what I should pay? It can’t work, and it doesn’t work.
Minimum wage advocates claim it’s different on the lowest rung of the pay scale. But it’s not. Every employer pays as much as he or she can to get the best possible workers.
If the government sets a floor on what can be paid for a certain kind of job, either the job won’t be filled; someone overqualified will do it; or automation will substitute.
There’s tons of research on the minimum wage. But the bottom line is common sense. All employers will hire the best workforce they can afford. If government limits what they can afford, the workforce will be constrained.
A new report from the Congressional Budget Office confirms the common-sense conclusion. Although a $15 minimum wage would lift 1.3 million out of poverty, at the same time, 1.3 million jobs would be lost — in the mid-range scenario. And 3.7 million jobs could be lost in the worst case.
This is even giving Democrats pause.
But what is missing from this analysis is how many would benefit from minimizing government interference in the marketplace altogether, rather than government stepping in and manipulating and distorting the marketplace.
The bread and butter of Democratic politicians is convincing voters they can make their lives better by expanding government and getting it more involved in private lives.
But data shows that the most prosperous nations are the ones with the freest economies.
Democrats also cause collateral damage by getting many Americans to believe what isn’t true — that politicians can make their lives better.
Want to help those struggling at the bottom? Reduce regulations. Cut taxes. Minimize government interference. And unleash the creative potential of a free marketplace.