Paying the max price for minimum wage

Published 5:39 pm Monday, January 22, 2007

By By Tray Smith
Government regulation of private sector enterprises stems from the belief that it is better to have no such enterprises at all than it is to have enterprises that do not comply with government standards. It is this belief that led to the Federal Labor Standards Act of 1937, the law that gave us the minimum wage. Though it was created during a time of economic crisis that often led to the adoption of reactionary rather than rational economic policies. This counterproductive creation of economic populism lives on today despite the burdensome effects it has on workers and employers alike.
Yet the newly elected Democratic House of Representatives recently voted to increase the minimum wage with broad based Republican support, ignoring even the most basic economic realities while escalating the detrimental affects of a policy that was problematic enough beforehand.
I sympathize with all working people who are dependent on a minimum wage job, yet those who are not able to find a job in the first place because of the minimum wage's perverse effects should be pitied even more. The essential problem with the federal government mandating a wage threshold is that by requiring employers to pay workers a certain amount, it basically states that it is better for workers to have no job at all than one that pays less then the national minimum wage. Thus, instead of increasing worker compensation, businesses will simply limit job growth, preventing the lowest-skilled and often times most needy workers from entering the workforce in the first place. By forcing employers to pay employee's $7.25 an hour, the minimum wage denies employees the right to work for $5 an hour if they choose to.
House Speaker Nancy Pelosi endorsed the legislation by stating that, "After nearly a decade, 15 million hard-working families will finally receive the pay raise they have deserved for so long." Mrs. Pelosi's assumption that the only way these "hard-working" families can receive a raise is, quite literally, by an act of Congress embodies the mean-spirited liberal economic belief that the working poor cannot move up the financial ladder like everyone else and are therefore dependent on the government's assistance. Under this assumption, employers have no reason to pay anyone anything higher than the minimum wage unless the government tells them to.
Outside of the liberal economic fantasy land, however, the vast majority of all those who make the minimum wage this year will soon be promoted. The idea that millions of workers' compensation has remained stagnant since the last time Congress increased the minimum wage in 1997 is a fallacy.
Furthermore, several of our nation's working poor already make more than the minimum wage, and several of our nation's minimum wage workers are not poor. Only one fifth of America's wage earners receiving the minimum wage are in families with incomes below the federal poverty line. Of the 1.9 million hourly employees who make the minimum wage, half are under 25, a quarter are between 16 and 19, and three fifths work in restaurants where tips (which often go untaxed) supplement wages.
The "American Dream" is supposedly to be about having the freedom to enter the workforce, improve your skills, and with the accumulation of experience and/or education, move up the ladder. The minimum wage denies that opportunity to Americans by pricing them out of a job for which compensation should be set by the market, not the government. It does not create wealth, if it did, there would be no reason not to set it at $20, $50, or even $100 per hour. Instead, it redistributes wealth in a way that is unfair and counterproductive to economic growth. It favors big businesses like Wal-Mart which can easily absorb the increase in labor cost while hurting smaller businesses that are already having trouble competing.
In addition, the minimum wage precipitates our already uncontrollable illegal immigration problem by encouraging employers to continue to hire undocumented workers for less money. It encourages companies to ship jobs over seas where there is no minimum wage. Research has also proven that increases in the minimum wage correlate with increases in the high school dropout rate, which is understandable as teenagers who live with their family believe they are making a lot of money at $200 a week. But when these teens grow up and get a family of their own, they will find such income insufficient, they will not have met the educational requirements to move further up the ladder, because they will become nothing but statistics cited by Democrats pleading for another minimum wage hike 10 years from now. Meanwhile, their peers who graduated high school and possibly college will go on to surpass them in standard of living and financial status.
Perhaps Sen. Shelby said it best recently when he pointed out that, "if government regulation could guarantee everyone a living wage, Russia would be the richest planet on the face of the earth."
That is the bottom line.
Tray Smith is a sophomore at ECHS and former intern in the Riley administration. He can be reached for comment at

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