By Jon Dougherty, editor-in-chief
The turnaround in stock market and employment gains since Donald Trump became president are both remarkable and record-setting, with Americans across all demographics doing much better economically.
The effects of a two-prong approach — cutting corporate and personal income taxes as well as repealing job-killing, economy-burdening regulations and ‘free trade’ agreements — has resulted in low unemployment, business growth, and wealth creation for working-class Americans via retirement investments in the stock market.
But Democrats continue working to reverse these gains by introducing or passing legislation that saps economic growth, suppresses business expansion, raises unemployment, increases poverty and relegates more Americans to federal assistance, most notably through mandatory hikes in wages.
The concept is simple to explain and, when explained, easy for most Americans to understand: If you force a business to pay more to a worker than his or her job is worth or that the business can afford to pay and remain viable, businesses are either going to close or lay off workers, and in doing so, cut back on benefits as well, which are factored in as part of an employee’s pay package.
Ryan Young, a fellow at the Competitive Enterprise Institute (CEI), a free market think tank in Washington, D.C., said the minimum wage “is not a free benefit.” What’s more, he said they increase inequality because it artificially high wages help some workers at others’ expense.
Mandating minimum wages forces “employers to reduce non-wage pay such as insurance, breaks and personal time off, free meals or parking, and more,” Young said in a statement to the Free Beacon. “A hike in the federal minimum wage would also cause an estimated two million jobs to be lost and hit small businesses the hardest.”
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Study after study has shown that when the federal government has mandated a higher minumum wage over the course of the past few decades, the end result has been less, not more, overall employment. Particularly hard-hit are young Americans who are trying to enter the workforce for the first time. They are attempting to get jobs in a low-skill setting like a fast food restaurant, businesses that also have razor-thin profit margins. Artifically raising wages for those low-skilled jobs leads businesses to cut back on staff, automate with robotics, or close.
The Free Beacon notes:
According to a recent Mercatus Center report, from 1994 to 2014, labor force participation among 16- to 19-year olds fell from 53 percent to 34 percent. The center attributes the sharp decline to the federal government raising the minimum wage five times over the same time period, from $4.25 an hour to $7.25 an hour, a 71 percent increase.
As a result, many low-skilled young adults either lost their jobs or were unable to find employment because higher wages made it less profitable to keep them employed, the study reports. Additionally, “some workers are never hired in the first place, and these willing workers are disproportionately young and minority,” CEI’s Young adds.
Besides the negative economic impact of minimum wages, there is a libertarian aspect of policymaking to consider here as well. In a truly free society, with a truly free-market economy, libertarians rightfully ask where governments get their authority to set pay scales for private-sector businesses? If government can mandate wages, then we really don’t live in a free society.
What’s more, as the American Enterprise Institute notes, mandatory wages are almost always arbitrary and not based on any sound economic models. The popular wage level among the progressive Left today is $15 an hour; where did that figure come from? Why not $30 an hour? $300? $1,000?
Also, this ‘one-wage-fits-all’ approach cannot possibly address issues of “poverty” in all parts of the country equally. Fifteen bucks an hour in Springfield, Mo., would go a lot farther than $15 an hour in San Francisco. That said, making Springfield businesses pay that kind of money per hour to employees would be a hardship given that the standard of living is lower than in San Francisco, where businesses might find that wage to be a bargain.
Nevetheless, Democrats have seized upon minimum wage as a wedge issued because they know that the message of “wage inequality” will resonate with a segment of American society. Playing on a person’s emotions by portraying them as victims of selfish, greedy “corporations” is a winning issue, politically, for Democrats who will take the victory no matter what long-term damage it does to the U.S. economy.
“If you trust government officials and politicians to set a minimum wage for unskilled workers, you should logically trust those same bureaucrats and politicians to set all prices, wages, and interest rates in the economy,” writes Mark J. Perry, an economics professor at the University of Michigan and an AEI scholar.
“Inevitable result: Soviet-style central planning, command-and-control, and economic chaos like in Cuba, North Korea, and Venezuela,” he added. “If you agree that economy-wide central planning and price controls would be undesirable, then I think you should also agree that the minimum wage law, as an arbitrary, artificial, government-mandated price control is undesirable. There are better ways to help unskilled workers than a distortionary government price control.
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