Contact FreedomWorks

400 North Capitol Street, NW
Suite 765
Washington, DC 20001

  • Toll Free 1.888.564.6273
  • Local 202.783.3870

Blog

    The Cruelty of the Minimum Wage

    In his State of the Union speech Tuesday, President Obama called for an increase in the federal minimum wage, gloating that it had been endorsed even by his vanquished moderate Republican opponent in the 2012 campaign. A minimum wage increase is not needed, and would harm those it's supposed to help.

    The minimum wage actually works as a maximum wage for millions of low skill, or no skill workers.

    A few years ago, I ran into some financial difficulty. A sudden drop in income and a lifestyle I suddenly couldn't support forced me to take a part-time job. With the economy and job opportunities scarce, I ended up delivering pizza.

    Food service workers are typically hired at low wages. Once new hires show their ability to learn and excel in their jobs, opportunities for increased pay and responsibility are supposed to follow. Because of the minimum wage, new hires already earn the amount the market will bear, resulting in static pay. It's a glass ceiling for wages at the bottom end, accentuating a culture of discouragement and apathy. People learn from that distorted experience that the only way to advance is to vote themselves an increase in pay. The minimum wage teaches exactly the wrong lessons.

    Companies who hire at minimum wage often have a large workforce and low profit margins. Therefor, increasing wages, even slightly is a burden on the employer as it is multiplied by the shear size of their employee roster.

    Maryland bartender Sarah Smith said raising the minimum wage just means fewer jobs. "In the service industry turnover is commonplace, exponentially more than any other industry." A higher minimum wage would stifle the mobility of service workers, making it difficult to find work -- forcing people to stay in jobs they don't want.

    There is a culture among young, minimum wage employees of trying out jobs and establishments to find a place they like and people with whom they are comfortable. The same goes for the managers: they get to know the local labor pool, often being part of it, and want to be able to give someone new a chance. The higher the minimum wage, the more difficult it is to give someone new that chance.

    Smith noted that proponents of increasing the minimum are using those in service industry jobs as an example of whom it will benefit. She doesn't think it will help at all. "Upward earning potential is based on performance, not how much you make when you are hired."

    Keith Hennessey made what many see as the obvious and complete rebuttal to the President's call to raise the minimum to $9/hour, by asking, "Why not $90/hour?" Hennessey says any increase suffers from the same problems:

    The same logic holds, just to a much lesser degree, for a minimum wage increase of any size, including the increase to $9 proposed tonight by the President. A minimum wage increase precludes employers from hiring, or from continuing to employ, those workers whose productive value to the firm is worth less than the new minimum wage. Like any price ceiling or price floor a minimum wage restricts supply, and an increase in the minimum wage restricts supply more. Raise the minimum wage and you will eliminate jobs for the lowest-skilled workers in America.

    Yesterday, on TheBlaze there was a good discussion on minimum wage jobs, and how they provide on the job training. How the minimum wage is a cruel insult to young people, especially in poor neighborhoods without a lot of other opportunities.

    “I think it is inflationary,” said Rep. Paul Ryan (R-WI) to CNN. “I think it actually is counterproductive in many ways. You end up costing jobs from people who are at the bottom rung of the economic ladder.”

    Most people working at the minimum are like I was, part-timers. All together, according the the Bureau of Labor Statistics only about 5% of people paid by the hour make the minimum or less.

    Like many liberal policies, raising the minimum wage will only harm those it 'intends' to help. The minimum wage is a cruel idea whose time has past, and in fact, never was.

    6 comments
    Samuel Brown
    02/17/2013

    Raising the minimum wage adds to wage compression. Those who have already been hired see those newly hired at the new minimum wage making, in some cases, what they are making after having been working for some time. Also, I have observed, that whenever the minimum wage is raised, the price of every thing else is also raised. (especially groceries.)

    Penny Twitchell
    02/16/2013

    This is a complicated issue and I do not know all the facts nor have a clear answer. However, I do not agree that most minimum wage earners are part-timers. In my area there are plenty of couples working full-time in minimum wage jobs and trying to raise a family in some cases. Also, there are many large companies that make plenty of profits yet do not pay their employees as well as they could. I recommend reading the book, "Nickel and Dimed" to get some insight into the challenges workers in low wage jobs face. It may be a 10 year old book but I truly believe that the experiences the author went through are still valid today; maybe even more so. Affordable housing is a huge issue for low wage earners. I wish everyone could get a quality education but that's a completely different topic.

    lheal's picture
    Loren Heal
    02/17/2013

    I understand full well what it's like not to make a lot of money, Penny. And what companies pay people is between the companies and the people they pay. If we tell them they have to pay more, they will hire fewer people (or raise their own prices). There is no free lunch.

    Live Free-as-Me
    02/16/2013

    Liberal policies always sound good "in theory"... the result of this is the young and inexperienced will find fewer jobs; employers who would like to hire more will not be able to, forcing more duties onto their present employees, and the price of everything we consume will go up to compensate for the higher wages, putting these same minimum wage workers (really all consumers) right back where they were... paying much more for goods and getting much less for their money. What a vicious cycle.

    Lee Scott
    02/16/2013

    And no mention of what will happen to all those union wages that are, by contract, some multiple of the minimum wage. They will all go up at the same time, thus costing their industries millions in additional wages even though their union members already make far in excess of the minimum wage.

    lheal's picture
    Loren Heal
    02/16/2013

    Quite true.

    Pages