The Never-Ending Capitalist Problem
[This is from an article I wrote February 21, 2013. I find it interesting that this is a prevalent issue once again. Perhaps you’ll find this illuminating for the issue at hand today.]
In President Obama’s State of the Union Address on February 12, 2013, he declared his hope that Congress raise the federal minimum wage from $7.25 per hour to $9. In his 2008 campaigns, Mr. Obama discussed raising the wage floor to $9.50, but has since reconsidered.
From a basic course in Microeconomics, or minimal research on the Internet, anyone can quickly discern the drastic consequences of not only having a minimum wage, but especially raising it during a time of economic difficulty. Sources, such as The Wall Street Journal and The New York Times, reference renowned economists in consensus that the President’s suggestion will increase the unemployment rate and greatly cripple the poor.
Amongst other reasons, Mr. Obama cited bolstering of familial incomes and provision of “ladders of opportunity” as motivations for increasing the federal minimum wage. Though his speech touts economic leveling and equality of opportunity for all, his approach contradicts that.
Mr. Obama painted an image of families across America earning only $14,500 a year being forced to choose between “groceries or food banks” and “rent or eviction.” In a study by Richard Burkhauser and Joseph Sabia, 34% of minimum-wage workers are in families collectively earning more than three times the poverty line; 17% were in poor families. The average household income of those with a minimum-wage worker is about $47,023, according to The Wall Street Journal in an article published last week.
Most of this can be explained by the simple fact that the largest category of minimum-wage workers is young adults between the ages of 16 and 19. These individuals are gaining their first job experience, not supporting a family. For those struggling to provide for dependents with a minimum-wage-paying job, it is that very wage which immobilizes their economic endeavors.
Research shows that with the rise of each minimum wage, the lower-skilled workers relying on it are directly negatively affected. Though President Obama insinuated that that this wage increase could “stick it to the man” (so to speak), it is actually those employers who are forced to raise the qualifications of minimum-wage jobs to equal the cost to them of employment. Meanwhile, the pursuit of higher human capital (generally in the form of education and work experience) is practically impossible to achieve.
Take, for instance, the familiar example of a young person in high-school working at a burger restaurant. He makes the minimum wage at a job requiring very teachable skills. However, if the wage floor increases, this young man has to fight to retain his position given that the employer now must raise his standards in conjunction with the pay. Studies show the student may be more inclined to dropout of school to maintain his minimal hold in the job market. Now, even lower skilled workers, who may have dropped out of school in a previous minimum wage hike, are completely incapable of gaining or sustaining a job.
When America is in a tenuous economic state with people in fear of losing jobs, does it make sense to create difficulty for employers in hiring people? It makes political sense to boost approval ratings with eloquent rhetoric spoken to an uninformed public. But it is with complete disregard toward human flourishing for such an administration to further confine the poor to their current state. Very few workers will get the $1.75 raise; most of the least educated will simply be out of a job. If President Obama really wants to give the nation “ladders of opportunity,” he should eradicate the minimum wage and allow for truly equal opportunity for both employers and employees.
vérité et de grâce
truth and grace