Politicians push job-killing minimum wage hikes while ignoring the devastating economic reality

Fox News

2 days ago

Despite it being widely known by anyone who can think two steps ahead that price controls have negative consequences, politicians can't help but continue to promote price controls as policy.
With Americans facing increased costs of living, there has been a return to calling for minimum wage hikes from democratic socialists like New York City Democratic mayoral candidate Zohran Mamdani, who wants to raise the minimum wage in the city to $30/hour, to Republican Sen. Josh Hawley, who is bafflingly pushing an increase in the federal minimum wage to $15/hour with additional increases indexed to inflation.
If wages could be raised by mandate without negative consequences, why would we stop there? Why not make the minimum wage $100/hour, $100,000/hour or even a cool $1 million/hour?
Because in real life, that's not the way things work.
The minimum wage has always been an evil policy, rooted in racism. It was passed as legislation precisely to exclude unskilled workers, particularly immigrants, minorities and women, from the workforce. It has the same effect today.
But the financially illiterate don't seem to understand basic economics.
The minimum wage is not an average wage, median wage, maximum wage or even an expected wage. It is quite literally a floor (although, as economist Thomas Sowell has pointed out, the real minimum wage is zero). As reported by the U.S. Bureau of Labor Statistics ("BLS") via FRED, only 1% of workers report being paid at or below the federal minimum wage, and that data is "based solely on the hourly wage they report (which does not include overtime pay, tips or commissions)."
The minimum wage is heavily slanted toward teens and workers entering the workforce with few skills. As the BLS noted, "Minimum wage workers tend to be young. Although workers under age 25 represented one-fifth of hourly paid workers, they accounted for 43% of those paid the federal minimum wage or less."
While minimum wage directly impacts a small number of individuals, its effects ripple throughout the economy at large. If teens and unskilled workers have a guaranteed wage floor, those with skills and experience will want to be compensated even more.
That increases both wages and taxes paid for a business throughout their labor force, as well as that of all their suppliers, adding substantially to operating costs and reducing what may already be slim operating margins. The businesses will either have to make less money or pass on costs to consumers – or both.
This makes products and services more expensive and, in many cases, will put businesses out of business across the economy as every company now competes in a market where nonskilled workers have a high fixed cost set by government.
Sometimes, businesses will also reduce product sizes or service offerings – shrinkflation, as we saw under the last administration – but one way or another, that increase in labor cost flows through the economy and impacts what you are able to get for your dollars.
It's notable that small business owners, who often work well in excess of 40 hours of week and risk their own capital, don't get a guaranteed wage, but politicians are happy to make entrepreneurial efforts more risky and costly.
The minimum wage, particularly the federal proposals, don't take into account different economic costs by region or geographic area, either.
Just because bad policy exists doesn't mean that we should keep doubling down on it. Pay should be negotiated between parties based on value and demand for skills and services.
An economy cannot function without being able to get people into the workforce and trained. We need to keep jobs where people can enter the workforce, learn skills and, if desired, move on in their career paths.
At a time when AI is threatening jobs, and technology is replacing workers, enacting legislation that incentivizes fewer jobs and makes it more costly and difficult to run a business is patently insane.
Wages will naturally shift with the market for labor, as we have seen in recent years. Politicians who are trying to "help" will once again find that intentions do not equate to outcomes, and their policies only make the cost-of-living issues worse.
If they want to help in a way that drives positive outcomes, make it cheaper and easier to do business by removing costly regulatory barriers and red tape.
That is the path to a flourishing economy and better cost of living, not mandated wages.