Arguments Against Raising the Minimum Wage

by Kristin Knepper

Recently, workers across the US have been demanding that states raise the minimum wage rate to 15 dollars an hour. Senator Tom Harkin has recently said “People who are making the minimum wage, basically they're spending just about all their money because they don't have much left, so if you give them a raise, it means more for our gross domestic product." (NPR, 2012). Many of my friends have shown support for this, without understanding the full implications of raising wages.

It is most simple to think about minimum wage from a small business perspective. Businesses pay wages based on the productivity they derive from that employee. When the minimum wage is increased, businesses must ensure the new price reflects the benefit they receive. They can either demand more productivity from each employee, or fire the least productive and only employ the most productive workers. This actually leads to more unemployment and fiercer competition, hurting the lower class. It will also lead to the closing of businesses in the long run, because they will be unable to operate with higher costs. Or they can operate at higher costs, by raising prices. So now employees have more to spend, but goods cost more. They are just as bad off as they were before.  As chief economist to the National Federation of Independent Businesses explains, "It's not the job of businesses to turn themselves into social service providers and pay in excess of value to the firm, we do have something called the earned income tax credit, where we provide supplemental income to people who are working but need more money." (NPR, 2012).

Raising the minimum wage without thinking of the unintended consequences will hurt, not help the lower class and unskilled workers. “The best wage rates for labor are not the highest wage rates, but the wage rates that permit full production, full employment and the largest sustained payrolls” (Hazlitt, 1979). I think my friends would agree, it’s better to pay 100 workers $9/hour than pay 60 workers $15/hour, making the remaining 40 workers completely unemployed.

 

Works Cited:

“Raising Minimum Wage: A Help Or Harm?" NPR. N.p., 8 July 2012. Web. 28 Feb. 2016.

Hazlitt, Henry. Economics in One Lesson. Three Rivers Press, 1979.

Picture link: http://www.thefederalistpapers.org/uncategorized/hilarious-bernie-sanders-meme-reveals-the-horrifying-truth-about-socialism