What’s a wage? A fixed, regular payment by an employer to an employee, especially to a manual or unskilled worker. The wage represents the value an employee brings to the job. What’s minimum wage? The minimum amount per hour the government requires employers to pay employees.
So what’s the problem?
First, government should never mandate business decisions because the government knows nothing about running businesses, let alone any specific operation. A business owner is the only individual who can make valid decisions about what wage to pay. A wage represents and is established by what the market will bear. There’s no way anyone other than business owners can make this determination. Government edicts mandating minimum wages don’t change the facts of business. Labor costs can’t exceed the value of what’s produced by that labor.
Secondly, minimum wage jobs are generally entry level jobs. These jobs offer a perfect place for young people to gain experience or for the unskilled to find employment.
Most workers don’t stay in minimum wage jobs. These jobs provide needed work experience that lead to other areas of employment or advancement within a company. When government forces companies to pay an unrealistic minimum wage, young and unskilled workers can’t compete with more skilled employees. These young or unskilled people face challenges in acquiring work-related skills that in turn keep them from succeeding financially.
There’s a proposal by some in the state and federal government to set $15 an hour as the minimum wage.
It would not matter, though, if the proposal is $15 per hour or $50 per hour. The problem is a matter of value. Government mandates of minimum wages force business to reduce staff, raise prices or close their doors. None of those choices is good for employees, businesses or the economy.
Seattle serves as exhibit A in this discussion. Following the passage of an escalating minimum wage law, Jacob Vizdor, study director for the University of Washington evaluation of the Seattle minimum wage, concluded: “The city’s escalating minimum wage has meant a slight increase in pay among workers earning up to $19 per hour, but the hours worked in such jobs have shrunk.” The study also estimated the minimum wage law cost approximately 5,000 jobs in Seattle.
The only way government can improve the plight of workers is to remove job-killing policies that stymie business. Less restrictive policies allow employers to make decisions for their business without excessive government intervention. The ripple effects of such actions include business growth and more entry level employment opportunities.
Raising the minimum wage sounds good and garners votes for politicians. But minimum wage laws diminish job opportunities for young and unskilled workers. These laws also limit the freedoms of business owners to manage their own resources. The unintended consequences of minimum wage laws do more harm than good.