Rev. Gerald Zandstra from the Acton Institute makes the argument against the minimum wage hike, and it’s a compelling one:
People making $5.15 will soon be paid $7.15. Everything else will remain the same. But this simply isn’t the case. For those who want to understand the effects of implementing a higher minimum wage, it is important to have a grasp of this truth: When the government puts in place a certain public policy, there is always some response that comes from the marketplace.
In public-policy circles, this is called the elastic effect. For instance, increasing the entrance fee to a public park by 5 percent would lead us to conclude, on the basis of logic, that the park would take in 5 percent more income than it did last year. But, in fact, this is not necessarily the case because increasing the cost may cause 10 percent fewer people to visit the park, resulting instead in a net reduction in revenue.
The problem with the minimum-wage solution is that it leads to negative consequences that are equal to—or sometimes worse than—the problem that the policy sought to remedy. Studies over the past forty years indicate that a legally determined minimum wage leads to fewer available jobs, especially for the very people the legislation wants to help. Labor economists, for example, point out that a 10 percent forced increase in wages would increase unemployment by 1 to 3 percent.
Helping the working poor is a laudable end, but employing means that only make things worse is senseless policy.
Worse still for larger companies that can afford to do so, outsourcing becomes a very real and viable option where labor costs are far cheaper than state-enforced price controls on labor in America allow our workforce to be. Small businesses either fold or inflate the price of goods, passing costs to the consumer, negating any real impact a minimum wage increase held.
Then the cycle begins anew…