Minimum Wage Has a Dark Side

Minimum Wage Has a Dark Side

( – As Congress works to pass another multi-trillion-dollar COVID-19 relief package, Democrats are conspiring with the White House to insert a $15 per hour minimum wage increase into the bill. One would assume that politicians and policymakers understand the implications of their policies, but perhaps that’s asking too much in this instance?

The minimum wage is an artificial government mandate, and it comes with a dark side hidden from the public’s view. As with any action that disturbs how the marketplace works, it comes with consequences. No one wants people to be stuck at the bottom of the economic ladder. According to the US Census Bureau published in September 2020, approximately 10.5% of the US population lived below the poverty line. However, the minimum wage won’t actually help most improve their situations. Instead, it could hurt those it’s meant to help the most.

What Does Economic Science Say?

When the government increases the cost of business, companies will find ways to cut costs through technology and innovation. However, it’s not the only argument to make against the government mandate. Instead of looking at the wealth of research available on the minimum wage, the National Bureau of Economic Research (NBER) evaluated numerous studies since 1992. They determined that over 80% of studies showed that the minimum wage created a negative impact on the lower class.

The economic reality is that the law cannot artificially determine someone’s worth. The marketplace, and the marketplace alone, does that. Wages in high-demand, low-skilled jobs are determined by what the consumer is willing to pay for a product or service. One regressive outcome of the policy is that increasing wages squeezes the labor market. By inflating wages, jobs at the bottom become more attractive to workers with more skills who may be willing to take those jobs. The result – displacement of lower-end workers. At the same time, prices for goods and services go up. In some instances, prices go up proportionally higher than the value of the wage increase, causing a true wage decrease.

In the end, the increase leaves many workers worse off than before the increase.

Opportunity Replaced With Dependency

The most damaging effect of increasing the minimum wage is lost employment opportunity that results in greater government dependency. As wages increase, people will no longer qualify for government programs. Instead of working, many could choose to stay home and collect benefits such as Medicaid, food stamps, and housing allowances.

Government forces people to decide between the dignity of work and dependency that often becomes generational.

What’s the Real Goal of the Minimum Wage?

According to the Economic Policy Institute, increasing the minimum wage could result in 1.3 million jobs disappearing, and it could go as high as 3.7 million lost jobs. Additionally, it hints at what could be the government’s real motivation to artificially control the minimum wage. If enough people are working and wages are higher, so are tax collections. Some estimates suggest that FICA revenues alone could surge from $7 billion to $13.9 billion.

While government creates winners and losers, its ultimate goal is to set itself up as the winner. However, even then, the cycle repeats, and the public loses again. As the politicians see more money rolling in, it gives them the incentive to find new ways to spend it and new ways to find new revenues down the line to solve the problems they ultimately created.

There’s no question. The minimum wage has a dark side to it, and it’s difficult to determine who wins when the government manipulates markets for its own benefit.

Don Purdum, Independent Political Analyst

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