Minimum wage, maximum obtuseness

Governor Mark Dayton seeks to stifle economic mobility by raising the minimum wage.

Derek Olson

From Gov. Mark Dayton to President Barack Obama, Democrats nationwide have made raising the minimum wage a prominent issue in 2014. In doing so, they are disingenuously inflating their false virtue. The truth is clear: The minimum wage harms precisely those it is designed to help. Advocating a raise in the minimum wage can only be based on one of two things: ignorance or self-serving malevolence.

Increased prices come with less demand. It’s one of the most fundamental principles of economics. If the price of apples rises, people buy fewer apples. If the price of labor rises, consumers of labor (employers) buy less labor; ergo, more workers will be unemployed.

Consider what would happen if the government set a minimum price of $50,000 on automobiles. Does that affect Honda or BMW more? Without the availability of inexpensive vehicles, many consumers would resort to other means of transportation: buses, trains, taxis, walking, biking or simply carpooling. In the same way, if the government mandates a higher price for labor, businesses will find substitutes, such as outsourcing or mechanization.

Just like Honda, a low-end producer of vehicles, a minimum price on labor most harms workers with low-end skills who are unable or unequipped to find higher-quality jobs. This is what makes the minimum wage so cruel: Its victims are those at the bottom of the economic totem pole. Not only could they lose out on their current job, but the government could rob them of the work experience that could help them acquire a higher-paying, more satisfying job.

This is the real effect of the minimum wage: to eliminate the bottom rung from the economic ladder. Workers age 24 or under fill more than half of all minimum wage jobs. Sometimes the work experience of an entry-level job is even more valuable than the compensation. The vast majority of American workers do not remain on minimum wage their whole life. Virtually all 99.5 percent of employed Americans age 25 or older earn more than the federal minimum wage.

Economists from Cornell University and San Diego State University calculated who would be affected by an increase in the minimum wage to $9.50 as part of a recent study. They found about 63 percent of those workers were second or even third earners in families with incomes twice the poverty line or more. Furthermore, only 11 percent of those workers lived in households officially defined as poor.

The left keeps perpetuating the narrative of one minimum wage-earner struggling to support a family. This narrative is not as common as they would like us to believe, and it doesn’t include the job losses that would lead to more families struggling on $0 per hour.

Minnesota is lucky to have one of the lowest minimum wage rates in the country. It’s good the Legislature hasn’t raised it since 2005. It would be optimal if in 50 years, we can say it still hasn’t been raised since then. Not only does increasing the minimum wage destroy jobs, but it takes them from the least-skilled, least-prosperous Americans.

I will discuss more nuances of the minimum wage next week, including the implausible claim that it does not affect employment.