The minimum wage in America is currently $7.25 per hour. It has been at that level since 2009. I believe the minimum wage is overdue for an increase. Democrats have argued consistently for many years that the minimum wage needs to be increased to $15 per hour. Yet that would more than double the minimum wage.
This would be very bad for the economy and cost millions of jobs, not just in my opinion but also the Department of Labor and the Bureau of Labor Statistics. The question is, why do liberals reject proposals to raise the minimum wage by something less than $15 per hour? Why not $9 or $10 per hour, which would be a big increase?
Yet liberals are consistently against any increase less than $15/hour. Democrats are reportedly already crafting legislation to make it happen, and President Biden apparently believes he has the political capital to push it through now that the Dems have control of the House, the Senate and the White House.
While most low-income Americans favor the jump to $15/hour, let’s consider why such a move would be bad for the economy and jobs.
On the one hand, the Congressional Budget Office estimates a $15 minimum wage would increase the income of about 7 million employees at the low end of the wage scale initially. But such a move would also immediately cost 1.3 million other low-end employees their jobs, according to the Labor Department.
The reasons for this are well understood. Prices in a free market are set by supply and demand. A commodity’s price is where supply and demand stand in equilibrium. If government sets a price above the free-market price — such as a $15 minimum wage — supply will increase, but demand will drop. Thus, employers will seek other ways of meeting their needs, such as automation, a burgeoning field in today’s digital age – or more likely by cutting staff.
Many checkout lines in large supermarkets are already unmanned, for instance, and customers check themselves out via a computer screen. Double the federal minimum wage and all but a very few checkout lines across the retail space will be automated within another year or so.
Here are some facts liberals pushing the $15 minimum wage never mention: Only about 2.3% of employed Americans earn the minimum wage. Yes, that’s true. The industry with the highest number of such workers is leisure and hospitality, where many workers also earn tips, which constitute a substantial part of their income beyond their minimum wage base.
The usual argument for the $15 minimum is that an individual, much less a family, cannot live on the current minimum wage. That’s perfectly true: working 40 hours a week at $7.25 an hour would pay only $15,080 a year, before Social Security and other payroll deductions.
Yet very few minimum-wage earners are heads of households, and only about 1% of them are married. Half are under 25. Indeed, the typical minimum wage worker is a high school or college student earning money after classes, or a retired person who doesn’t want to sit home all day. At the end of his or her shift, the average minimum-wage earner goes home to a family that earns income at or near the country’s median of $68,000 a year in 2019.
For the few families dependent on a single wage-earner making the minimum wage, multiple assistance programs — food stamps, Medicaid, Section 8 housing and the earned-income tax credit — are available which together would raise the household’s income well above the poverty line.
So if a more than doubled minimum wage would help only a few people who need it, at the cost of significantly depressing employment at the low end of the wage scale, why are the Democrats so gung-ho in favor if it?
That’s a difficult question to answer. The Democrats were once the party of the ordinary guy and big supporters of labor unions. The Republicans were the party of the country club. This is no longer true. Unions now represent only 6% of private-sector workers.
Today, the Democrats easily carry the coastal elites and the higher echelons of big business, but they also carry those needing government assistance, government workers, public school teachers and most academics (who often need grants).
Republicans, in contrast, are now the party of the upwardly mobile, small business, entrepreneurs, and, interestingly, many members of big labor, dubbed “Reagan Democrats” a generation ago. In other words, today the Democrats are the party of government, and the Republicans are the party of the free market.
Raising the mandatory pay of jobs on the first rung of the socioeconomic ladder makes it much harder for people to get on that first rung and start climbing. Democrats would never admit it, but this actually suits them. Why? The upwardly mobile, after all, increasingly vote Republican.
Second, labor unions — the top source of funds for the Democratic Party and its candidates — are always in the forefront of the drive for a higher minimum wage. Very few union members earn minimum wage, though, so why do unions support raising it? Simple: because wages in labor contracts are often set as multiples of the minimum wage. Get Congress to raise the minimum wage, and many already well-paid labor union members get a raise too.
The bottom line is liberals favor a much higher minimum wage of $15 per hour. The fact that this will hurt the economy doesn’t seem to matter to them. So, expect them to keep pushing.
You failed to mention “salary compression”, even in a non-union job. If there’s a couple dollars difference between entry level jobs and a first step up the progression ladder, that first step would also have to be raised to maintain the differential. With several levels of progression, each level would also have to be raised to preserve the differential.
I’m a free market person, but there is one sentence in your post that makes me think. You state, “For the few families dependent on a single wage-earner making the minimum wage, multiple assistance programs — food stamps, Medicaid, Section 8 housing and the earned-income tax credit — are available which together would raise the household’s income well above the poverty line.”
What this is saying is, the government (i.e., your tax dollars and mine) are going to programs for people making minimum wage. If Acme Widgets pays minimum wage, and those employees then require assistance from the government, aren’t the taxpayers, in effect, subsidizing Acme Widgets? If Acme Widgets paid more, yes their prices would go up….but better that than having the government basically cover the wage gap that Acme Widgets won’t.
This is the one point that makes me think a higher minimum wage would be a good thing. I am very interested to hear if anyone has a better solution. I don’t think getting rid of those safety nets is a viable solution either….we aren’t that kind of country.
Minimum wage is a training wage. An employer cannot afford to pay a higher wage for a worker who is learning, has few skills, and low productivity. As the worker gains more skill, the wage will go up or the now skilled worker will move to another employer.
Democrats fail to understand that employers don’t pay the wage, customers do. The wage increase will be passed on to customers, including low-income customers. Not a net gain for them. This also applies to taxes. Taxes are paid by customers, not the corporations.