Why Raising Minimum Wage is Bad?

Why Raising Minimum Wage is Bad: Raising the minimum wage is bad because it hurts the poor, makes everything more expensive for everyone and makes it more difficult for everyone to get jobs, including people who earn incomes far above minimum wage.

Why Raising Minimum Wage is Bad?

Why Raising Minimum Wage is Bad?

Raising the minimum wage is bad because it makes everything more expensive. Let’s say a grocery store bagger earns a minimum wage of $7 per hour. And like everyone else, he spends some of his income on food to feed his family. Now let’s say that the minimum wage increased to $8 per hour. Every grocery store bagger will now earn $160 more per month than before. But how does the grocery store afford this increase in expenses? They raise the price of their groceries. Yes the worker earns more money but now everything in the supermarket is more expensive. So he’s no better off than he was before. However, for everyone else who earns more than minimum wage, they didn’t receive an increase in pay when the minimum wage increased, but they are going to notice everything in the grocery store becoming more expensive. Therefore, the minimum wage earner remains financially unchanged, while everyone else around him becomes poorer because their income no longer buys as many groceries as it used to.

Raising the minimum wage makes it more difficult for everyone to get a job. When a higher minimum wage is established by the government, it becomes more expensive for companies to spend time training people. This is part of the reason why you see job descriptions that ask for applicants with a certain number of years of experience and a certain level of education such as a high school diploma. Companies only hire people who already have the skills, experience and education to perform the task. This way they don’t have to spend $8 or $9 dollars per hour (whatever the minimum wage) training someone.

Consider a man who dropped out of high school for one reason or another. He applies for a job he believes he’ll enjoy. But because he has no education and no experience, he is not hired. But now let’s imagine a world where there is no such thing as minimum wage. This same high school drop out applies for the job (let’s say the job is working in a pet store.) The company realizes he has no education and no experience but because there is no minimum wage, the store can afford to spend the time it takes to train him to do the job. So they hire the high school drop out at a few bucks per hour with the agreement that if he demonstrates a willingness to learn and work hard, that at the end of two weeks, he will get a substantial raise that brings him up to a rate of pay equal to what the other store employee’s are earning.

But now let’s make the example more extreme. Let’s say that this man never went to high school at all and doesn’t even know how to read. Again, let’s say there’s no such thing as minimum wage. Let’s also say that this man is one of the nicest guys you could ever meet and so the store owner wants to help out his fellow man. Because there’s no minimum wage, the store owner could afford, at his own expense, to hire the man and spend the first three months of his employment just teaching him how to read. The store owner could pay him in the form of food. The store owner feeds him three square meals a day while teaching him how to read. Once the man can read well enough to read instructions on labels, the store owner puts him out in the store doing work and begins to pay him a reasonable compensation for the work that he does.

Unfortunately, in America, there is a minimum wage and so store owners can not afford to help out the poorest among us.

Furthermore, the current practice of hiring only those people that already have the education and experience, perpetuates itself through all levels of society. Thus a person with an Associates degree will seldom, if ever be considered for a position that asks for a bachelor’s degree. Our society, based on minimum wage laws, is not structured to hire and train people who don’t quite meet the qualifications.

The last point about why raising minimum wage is bad is because it causes jobs to be sent overseas. Minimum wage is solely responsible for the fact that today, nearly all of our goods are made in China. If American companies are going to skirt minimum wage laws by hiring people in foreign countries at below minimum wage rates then why have a minimum wage at all?

Most people assume that if there were no minimum wage, the poorest among us would work like slaves while earning only a few cents a day. But that’s not the case because we are a somewhat civilized, first world nation. The truth is that if there were no minimum wage, the prices of everything would come way down, thus, for example, $3 dollars per hour might yield the same purchasing power of what today is $7 per hour. Furthermore, wage rate standards would establish themselves through the free enterprise system. Individuals who are dedicated and hard working would be drawn away from lower paying jobs by companies willing to pay more for their talent. Thus in order to keep employees, every store owner would have to pay enough to hang on to his employees. This is basic supply and demand, the foundational economic model of a free enterprise system. In other words, talent would become a valuable commodity that follows the same price determination as supply and demand.