Federal minimum wage
To the editor:
This is an area where many of my conservative friends and I part company. Although they agree that government is too big and intrusive, I often hear them say that people can’t live on $7.25 per hour. They feel bad for people who have a family and only make the minimum wage. Of course, we all wish that everyone could make more but it is not up to us or even the government to say what they should be paid. It must be left to the free market because the market is the true measure of someone’s real economic value. We are in a world economy and if we are to progress in the long term we must be competitive with the rest of the world.
Now there are even demands that the Federal Minimum Wage Law be increased from $7.25 to $15 per hour. Many states and municipalities already have higher minimum wage requirements. These people are listening to their heart and not their head. We have some 20 million or more people who are either unemployed or under employed because the labor supply is much higher than the labor demand. Therefore, wages must be lowered enough so that demand will balance with supply. When wages are reduced the demand for workers will increase. Many unemployed workers would like to work even if the job pays less than the required minimum wage, but the government won’t allow it. I believe it is tyranny for a government to deny a citizen the right to work for whatever wage he negotiates with an employer. As a result these low wage jobs are eliminated and the unemployed get government assistance. We rob the unemployed of a chance to get on the employment ladder and the taxpayers end up supporting them. Even worse, we are making these people dependent on government and our government is broke so this kind of charity can’t be continued forever. In these cases, society as a whole suffers.
Recently the President signed an “executive order” raising the minimum wage to $10.10 per hour for employees on government contracts. The President and the liberals in Congress are pushing for legislation to raise the minimum wage for the entire economy to $10.10 per hour. The nonpartisan Congressional Budget Office estimates that such a move will result in the loss of 500,000 jobs within two years.
CBO says this is only an estimate and the real job losses could be as high as one million. The job losses could occur as a result of higher wages placing a greater strain on companies, which could lead to cutting jobs, reducing employee hours, and other methods to save the company money.
The Bureau of Labor Statistics data shows that unemployed and underemployed were 12 million in 2006 but had jumped to 20 million in 2014. Although the unemployment rate was down to 7.6 percent in June, 2013, if you include underemployment then the real rate was 14.3 percent. There are many causes for this but they all result from too much government regulation. In a free market where wages are determined by supply and demand there would be no unemployment except by those who didn’t want to work or those who could not work for medical reasons. Let me repeat, if not for the minimum wage everyone could have a job.
Many people are now being kept out of the market by the minimum wage law and other government regulations. The people most affected are those between the ages of 16 – 24. The unemployment rate of those 16 – 19 is 21 percent and those between ages of 20 – 24 is 12 percent according to January, 2014 data from BLS. These youth are not only missing out on the income they might receive from employment, but they are robbed of the opportunities and education that employment in the teen years provides. They miss out on learning on the job and the discipline and pride that comes from employment. If unemployed, many are bored and turn to delinquency and criminal behavior. To the extent that these youth turn to crime, society bears a large financial cost.
According to the nonprofit Employment Policies Institute, increasing the minimum wage has not proven to be effective at lowering the poverty rate. The institute said in a policy brief that “Multiple studies have demonstrated little to no relationship between a higher minimum wage and reductions in poverty.”
Raising the minimum wage eliminates low wage jobs because employers can’t always just pass these higher costs onto consumers. Many jobs are eliminated entirely because they are simply not worth the minimum wage. Why would we not allow teenagers to earn extra money by picking up paper and other trash along our roads and highways? I’m sure many would be glad to do such work for $4 or $5 per hour or even less but the Federal Minimum Wage Law won’t allow it. We are robbing them of the opportunity to make some extra money and also learn discipline. Some of these teens might stand out and be offered a better job as a result of this experience.
Another example of the minimum wage laws eliminating jobs may be when gas stations, formerly known as service stations, elected to purchase self service pumps resulting in much less service to the consumer. Do you remember when service stations would wash your windows, check the air in your tires and check your oil in addition to pumping your gas? You will never see this again because these jobs were priced out of the market. Many progressives disagree and argue that by raising the minimum wage some low wage jobs are lost but the remaining employees have more money in their pocket and are able to buy more, thereby benefiting the overall economy. If that were really true then just think how much the economy would improve with a minimum wage of say $25 per hour or better yet, $100 per hour. Of course that is preposterous. So, raising the minimum wage in order to help the poor has the opposite effect. If you really want to help the poor then eliminate most government rules and regulations and everyone could have a job. We need to stop all this government tampering and let the free enterprise system work. Our country would be so much better off if everyone had a job.
When these jobs are eliminated the employees are the real losers. Employees would be much better off to get a lower wage job which would allow them to learn and increase their knowledge and skills, making them more valuable in the future. Being unemployed is about the worst thing that can happen to a person. They may feel useless and unimportant as it lowers self esteem. Many times this results in the unemployed wandering aimlessly through life without hope and sometimes they feel forced to turn to crime. Since there are no legal jobs available with the skills they possess they see their situation as hopeless. Or they may turn to the government for help with food stamps, public housing, free medical treatment and free cell phones. Sometimes they have children who then must depend on public assistance. All of these result in a big cost to society in higher taxes to pay for higher costs for the courts and law enforcement as well as government welfare.
According to the Heritage Foundation, Switzerland is in the top five of free nations in the world but it has no minimum wage law. Its unemployment rate has averaged 3.35 percent for over 20 years and is now at 3.2 percent. People there have a job if they want to work and/or are capable of work. It is interesting that the average wage in Switzerland is about $37 per hour. The Swiss are not as generous with unemployment and welfare benefits as some other industrialized countries. They insist that people try to find jobs in order to receive aid. They also manage their immigration policy to correspond with their unemployment rate. For instance, when unemployment rises they cut back on immigration and guest workers.
A fourth grade teacher recently told me she suggested to her students that they should work hard and study so that they will get a good education and eventually a good paying job. One little boy said, “my dad has never had a job and our family is doing just fine.” This attitude is the result of second and third generations being kept out of the job market through policies that encourage people not to work.
Finally, we could have full employment if government would get out of the way and let the free market determine fair wages. People are better off with a job than being unemployed. They learn discipline and what is needed in order to improve their earning capacity. Having a job also improves one’s self esteem. People are much better off not being dependent on government. As they say, if you give someone a fish they will eat for a day, but if you teach someone to fish they will eat for a lifetime. As President Ronald Reagan said, “Government isn’t the solution, government is the problem.” We need to eliminate the minimum wage.
Robert J. Russell
Fort Myers