Why Raising the Minimum Wage is a Bad Idea

On this Labor Day weekend I’m reminded of my first two jobs in radio and TV; both were minimum wage, entry-level positions.  I was attending the University of Missouri and was doing a Sunday overnight shift at KFRU radio and, on Monday and Friday evenings, working a few hours at the ABC-TV station, loading commercials into the “film chain”.  Quite honestly, these were jobs almost anyone could do and there was a boatload of aspiring broadcasters like me who were hungry for such foot-in-the-door opportunities.

Working for minimum wage allowed me to gain valuable experience in the workplace and created a desire to improve my skills and move on to a better paying job.

It’s difficult to argue against the minimum wage without initially sounding like an uncaring jerk.  However, as the famous economist and Nobel laureate Friedrich von Hayek said, a government-imposed minimum wage is based on “simple economic ignorance.”

Proponents of raising the minimum wage always cite benefitting the poor as their primary reason for the hike.  However mandating a rise in minimum wage hurts the very people it attempts to aid.  Unskilled, uneducated, immigrants, and youth are most affected because the higher the wage, the less businesses will want to hire these individuals.  Here are some other consequences:

  • Businesses will increase employment qualifications for entry-level jobs.
  • Retailers, restaurants and fast food businesses will slash hours, cut staff and refrain from expanding their workforce.
  • As the cost of doing business increases, prices of goods and services naturally rise and even minimum wage workers will be forced to pay more for the stuff they purchase.
  • Those eligible to enter the workforce won’t be able to gain real life skills because few will hire them.
  • The level of automation will increase, completely eliminating many jobs.

Who wins with a minimum wage boost?  Unions and big businesses.  The wage for many union jobs is based on the minimum wage, so when it is artificially increased, they get a raise.  Big businesses like it because if wipes out competition from the mom and pop shops.  The big guys can better absorb a raise in minimum wage, while the little guy can’t.


Brian Sussman

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