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.

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“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.