Perspectives: How minimum wage laws do more harm than good

OPINION – Most of us remember our first minimum wage job with a sense of fondness. Mine was delivering prescriptions for Magic Valley Drug for a whopping $3.35 an hour.

As far as I was concerned, that was pretty decent pay for driving my boss’s Thunderbird and singing along with the radio. At the time I was too young to vote, so the thought of lobbying politicians to raise the minimum wage to a more agreeable level hadn’t even entered my mind.

Back then I would have been naïve enough to believe that such politicians were actually on my side. But today, as certain enterprising politicians are seeking a hike in the federal minimum wage from $7.25 an hour to $10 an hour, I don’t see it that way. What seems, on the surface, to be a boon to the working poor is, in fact, a policy that costs them employment opportunities in the long run.

From the politician’s point of view, raising the minimum wage makes perfect sense. James Ostrowski offers this tongue-in-cheek explanation of how this is considered good government policy, “Merely by typing certain words on paper and saying, aye, Congress puts real money into the hands of the poorest workers. Not only that, but it doesn’t cost taxpayers a cent because no government money is spent on the project. This is clearly a superb example of government at its best.”

That such a hike would be proposed during an election year is simply one of those amazing political coincidences we’ve come to expect from Washington D.C.

When we take a closer look at the underlying principles behind the government mandating the minimum amount that employers are legally allowed to pay their employees, some serious problems emerge. First and foremost is the fact that government is interfering in what should be a free market solution.

The reason for this is that the value of labor is subjective. When an employer decides to hire someone or to retain him or her as a worker, the employer places a subjective value on the work that person does. Likewise, the worker places a subjective value on the wages and benefits being offered.

If an employer subjectively places the value of someone’s work at $8 an hour, but that prospective worker wishes to work for $10 an hour, should that worker be hired? In a truly free market, the answer is “no.” The employer has placed a subjective value of $8 an hour on the work and if the worker wishes to be hired, he or she must be willing to accept the lower wage or not get the job.

When the government steps in and mandates that the employer must pay at least $10 an hour in wages, the employer will simply not hire new workers for labor that he subjectively values below the required wage. Even if the potential employee was willing to lower his required wage to $8 an hour, the minimum wage law prohibits him from doing so.

If such laws are truly helpful to the working poor, why doesn’t Congress go ahead and raise the minimum wage to $100 an hour, or $1,000 an hour? If a little hike in the minimum wage is good, a huge hike should be even better, right?

The problem with minimum wage laws is that they artificially set the wages for jobs that may not be worth what the government requires an employer to pay. When this is the case, employers simply refuse to hire and potential employees who would work for less than minimum wage remain jobless.

Guess who gets to support the jobless individual thanks to the minimum wage laws that have priced him or her out of a job? The taxpayers get to foot the bill through funding various welfare programs and unemployment benefits.

Entry level work should be considered just that; an entry into the job market where one can establish their work ethic and learn skills that will allow them to move on to higher opportunities.

Good intentions notwithstanding, the main effect of minimum wage laws is to create fewer jobs and fewer opportunities for the working poor.

 

Bryan Hyde is a news commentator and co-host of the Perspectives morning show on Fox News 1450 AM 93.1 FM. The opinions stated in this article are his and not representative of St. George News.

Twitter: @youcancallmebry

Copyright 2012 St. George News.

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