The big debate raging right now deals with whether or not raising the minimum wage would improve the economy; specifically by improving families financial situations in general. Obviously the President’s agenda includes raising the minimum wage, which he may or may not know is a fight to crush the poor and squeezes the middle class. The specific numbers regarding a potential federal minimum wage raise it to bringing it from $7.25 to $10.10 by 2016.
Unfortunately, when talking to someone who doesn’t understand the unintended consequences of this government intervention, raising the minimum wage might actually sound like a positive thing. Considering that the liberal agenda pretty much monopolizes the mainstream media, being able to educate a large portion of the voting population is rather challenging. To be able to understand the concepts and ideas that promote healthy economic conditions one needs to understand the principles that are working behind the scenes.
Hopefully this analogy won’t be too offensive, but hear me out. Imagine a parent asking a child if they would like to eat at McDonald’s right now or have a green homemade salad. It’s sort of a dumb question as most kids would choose to eat what taste good to them and they don’t have the foresight of the long-term benefits of what a healthy diet would bring. Children for the most part don’t even have a knowledge of what healthy eating is besides not eating what would have germs on it.
The reality is that some liberals perception is almost one in the same as a child’s perception. When the notion of giving poor people more money is presented to the masses the uniformed champ at the bit wanting it to happen as soon as possible. When progressive agendas such as raising the minimum wage and universal healthcare are flashed in front of them it is like the parent giving their child an option to eat McDonald’s over their normal mundane but healthy diet.
If you’ve been keeping up on this issue in the alternative media, you might have seen Peter Schiff’s controversy with the Daily Show where he was opposed to having any minimum wage and of course the Daily Show did a great job of taking what he said to make him look exactly like what the liberal media wants people like Peter to look like. Basically insensitive and wanting to take advantage of people and only showing bits and pieces of what was a four hour interview to make a mockery of free market fiscally conservative values.
On Tuesday, the Congressional Budget Office, or CBO, issued a report showing that following Obama’s plan would result in 900,000 people rising out of poverty and 16.5 million people benefiting from the wage hike. This might be true for the people who directly benefit from the wage increase, but what about all of the side effects from an increase like this?
Employers Will Hire Less Workers
That same CBO report estimated that 500,000 workers could LOSE their job from raising the minimum wage.
Having a minimum wage puts pressure on employers to eliminate lower skilled jobs. If an employer is going to have to pay someone $10.10 an hour, they might as well hire someone that has jobs skills worth that price. Unfortunately that will make it harder for unemployed individuals to start off in an entry level job to even get themselves started on a career path. We glorify things such as “Apprentice Programs” in schools and in life, but the reality is, apprentice programs for many corporations are a way to get free labor that doesn’t cost them anything.
Now the concept of it isn’t bad considering apprentice programs give individuals on the job training that is a very valuable skill to have, but what if there was a much lower minimum wage? Maybe there would be no need to have students work for free for 6 months out of their life. Maybe more individuals across the board wouldn’t be squeezed out of the workforce because they are unskilled.
If someone is a skilled worker, it isn’t in the best interest of the employer to pay that person the minimum wage if they could be paid more elsewhere. That person could quit and leave that business without a valuable employee. In a free market, companies would pay employees exactly what they’re worth. It is in the best interest of the company to pay the least they can to maintain that employee, but it’s in the best interest of the employee to be paid as much as possible. This creates an equilibrium at a fair market wage. It’s the job of the employer and employee to maximize the benefits for one another for maximum gain for both parties.
A Minimum isn’t required for this Natural Free Market Law to Exist
The “wake-up” moment that I wanted to point out on this topic is on the natural law in economics that if you increase the cost of labor across the board, people don’t get wealthier; it only drives the cost of goods up. It’s a net gain of ZERO if every minimum wage worker in America gets a pay raise. Actually it’s more like a net loss when you take into consideration that many employers are going to outsource to other countries for cheaper labor, along with all the new costs associated with raising the minimum wage in terms of bureaucracy and company adjustments.
In my experience, when the minimum wage goes up, the workers who are slightly above the minimum wage don’t get a pay raise. Truthfully, for everyone who didn’t get a pay raise, it’s like a pay cut for them in terms of their purchasing power. Then a less valued employee is now making the same pay as them.
P.S. What does this have to do with finances? Everything… the policies and environment that we operate in is in many ways a direct result of what is handed down to us from the top. With the government making life here in the states more and more oppressive, it’s even more crucial for individuals such as yourself to be proactive and forging your own destinies.
Chief Editor at CrushTheStreet.com