Depressions and mass unemployment are not caused by the free
market but by government interference in the economy.
– Ludwig von Mises
Minimum
wage does not help the poverty stricken; in fact, the continual raising of
minimum wage is not only hurting the poor, but it is hurting the job market.
President Obama and all those who agree with his call to raise minimum wage are
wrong. This is the wrong way to help our struggling citizens.
There
is clear evidence that raising minimum wage will not work. Between the years
2003 and 2007, 28 states across America raised their minimum wages without any positive
economic result.[1]
According to economists from Cornell and American University, they “found no
trace of lower poverty rates associated with these wage hikes.”[2]
The reason why the poor and not getting richer with a pay
raise is simple economics. If a company is not bringing in more profits to
adjust to the raise in employee wages, the employer has to either reduce
employee hours or terminate some of their employees to adjust for new
compensation plans. Businesses are not like the Federal Reserve, they cannot
just print up extra cash to “fix” their problems.
Naturally, the employees with the least experience or minimal
skill will be let go first. Minimum wage jobs typically are entry-level jobs
for people with little to no skill. As the minimum wage increases, the chance
of these people finding a job decreases. If the wages are increased, as the
President and the Federal government insists, it is estimated that 988,000 jobs
will be lost.[3]
The majority of the lost jobs will be in the retail and food industries.[4]
The government and economists have known of this cause
and effect phenomenon for years. In 1938, the Department of Labor reported that
a minimum wage hike at that time resulted in 30,000 to 50,000 people losing their
jobs.[5] In
1977, the Minimum Wage Study Commission, established by Congress, even
developed a mathematical equation related to the negative effects of raising
minimum wage: “time-series studies typically find that a ten percent increase
in the minimum wage reduces teenage employment by one to three percent.”[6] Economist
William Dunkelberg said, “after the July 2009 increase…nearly 600,000 teen jobs
disappeared, even with nearly four percent growth in the economy.”[7]
In 2007, the Federal government forced a minimum wage
increase on American Samoa and the Commonwealth of Northern Mariana Islands
(CNMI). The United States General Accountability Office (GAO) later reported in
2008 that as a result of the forced wage increase, there was “19 percent
decline in employment in the workforce.”[8]
Businesses like Chicken of the Sea and Starkist on Samoa laid off thousands of
workers.[9]
Government regulation and control of the economy leads to
poverty, more than it will help to prevent or solve it. A free market system is
the best way to help create jobs and raise wages. As Milton Friedman said: “The great virtue of a free market
system is that it does not care what color people are; it does not care what
their religion is; it only cares whether they can produce something you want to
buy. It is the most effective system we have discovered to enable people who
hate one another to deal with one another and help one another.”
John Stossel - Real World Effects of Minimum Wage
Does the Minimum Wage Hurt Workers?
[1]
Michael Saltsman, “Statistical problem of minimum wage and poverty,” Political March 31, 2013, accessed on February
10, 2014, http://www.politico.com/story/2013/03/statistical-problem-of-minimum-wage-and-poverty-88824.html.
[2]
Ibid.
[3]
Ibid.
[4]
Ibid.
[5]
Doug Bandow, “Raising Minimum Wage Will Hurt More than Help,” Cato Institute, April 9, 2013, accessed
on February 10, 2014, http://www.cato.org/publications/commentary/raising-minimum-wage-will-hurt-more-help.
[6]
Ibid.
[7]
Ibid.
[8]
Samuel Hearne, “Minimum Wage Law Backfires in American Samoa,” Action Institute, July 6, 2011, accessed
on February 10, 2014, http://www.acton.org/pub/commentary/2011/07/06/minimum-wage-law-backfires-american-samoa.
[9]
Ibid.
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