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Raising the Minimum Wage Will Backfire

Nancy Pelosi, the House Minority Leader, recently stated that if the Democrats win back control of the House of Representatives this November that they would raise the national minimum wage as one of their first orders of business. Besides this being typical empty liberal posturing, Pelosi’s claim is the wrong move for several reasons. First, it is wrong because raising the minimum wage will reduce the total number of available jobs. Second, it will hurt the profits of companies which will harm the economy.  And third, it will not solve the problem of poverty in this country. Regardless of the hype around minimum wage, don’t get sucked in to supporting a rate hike simply because of pity or liberal lamenting – the fact is, it will hurt our country more than help it.

Raising the minimum wage will reduce the total number of available jobs. It doesn’t take an economic expert to understand that when employee wages are obligatorily increased, businesses are forced to make changes to meet their budget. Thus, they usually cut jobs and reduce the number of hours of work for their workers. Not only will this reduce the number of jobs available, but it will cause many to lose their current positions. And those with steady hours will have their situations disrupted by having their shifts reduced. Furthermore, when the minimum wage is increased, companies tend to put more emphasis on qualifications and experience when hiring for those positions. Thus, they seek older, more experienced employees. This leaves out young, inexperienced workers.

Raising the minimum wage will hurt businesses which will harm the economy. When the minimum wage is raised, salaried and hourly employees also expect pay raises. They assume that since their minimum wage colleagues received a pay increase, they should as well. They also expect the original pay differential to remain intact. These concerns from higher level employees do one of two things. They either force companies to raise their wages, or hurt morale and create a poor working environment. Raising the minimum wage also forces companies to cut back on training, perks, and bonuses. This hurts productivity and causes output to diminish further reducing profits. Raising the minimum wage directly impacts businesses, their net income, and overall ability to grow. And it goes without saying that when businesses suffer, the economy does as well.

Raising the minimum wage will not solve the poverty problem and will in fact distract our leaders from focusing on solving the issue in a substantive, creative, and productive manner. Throwing more money at poor people does not solve their financial problems. Better education and better jobs does. If Ms. Pelosi and the democrats truly want to see poverty diminish in this country, then they should develop a true plan to combat the core problems. Increasing access to college, supporting the No Child Left Behind Act, and developing job training programs would reduce poverty more than any minimum wage hike. Instead of making a superficial effort to help the working class, our government leaders should focus on real ways to help these people improve their lives. 

I understand that the national minimum wage of $5.75 per hour is not ideal for full or even part time workers. I know several people with minimum wage jobs and currently have many friends and family who work full time at this pay.  I realize it’s difficult to live abundantly on that pay scale. That being said, I believe that a few extra dollars an hour will not drastically change their situations. Rather than relying on Congress to increase their pay, they need to further their education and job skills so they can find bigger and better jobs. We must stop band-aiding the bleeding in this country. If Ms. Pelosi and the democrats want to create real change for minimum wage workers, they should do something that will positively affect the workers, the companies, and the country. They shouldn’t sacrifice our strong economy and robust workplace simply to satisfy the liberal left and attempt to gain political popularity.

Written By

Dr. Williams is a nationally syndicated columnist, former chairman of the economics department at George Mason University, and author of More Liberty Means Less Government

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