OPINION: Minimum wage increase not all its made out to be

By Wyatt Bush

Who doesn’t want to see everybody paid at least $9 an hour?

As it turns out, almost everyone. As recently as March 2013, Gallup found 71 percent of Americans, including 50 percent of Republicans, supported increasing the minimum wage to at least $9 an hour, a somewhat arbitrary yet reasonable-sounding number.

The minimum wage was upped in Michigan earlier this year to $8.15 an hour, and it will gradually increase in upcoming years thanks to predominantly Republican support in Lansing.

That’s regarded as good news by many. However, what most Americans, even conservative Republicans, fail to mention are the hidden downsides of implementing such a wage increase.

What exactly is the minimum wage?

The minimum wage is what economists dub a “price floor.”

A price floor is effective when it is imposed above the equilibrium rate — essentially, the price and quantity of a good/service agreed upon by buyers and sellers. This causes a shortage of demand, as businesses want to pay employees less, and a surplus of labor, as more individuals are willing to work at a higher market rate.

Removing economic gobbledygook, that means more people want to work at a higher minimum wage, but employers find it more difficult or impossible to hire them.

One side effect of an effective minimum wage is inflation, as some businesses will try to raise their prices, thus shifting an increased burden of the wage increase on its customers, to compensate for the greater mandated wage.

Inflation in this specific manner is typically difficult to measure, though, and inflation rants don’t make for sexy columns.

The other, and, in my view, key effect of increasing the minimum wage is its impact on unemployment.

A February Congressional Budget Office report estimated 500,000 Americans would lose their jobs, in addition to those who would remain unemployed, should a federal minimum wage of $10.10 be enacted, as President Barack Obama and others have proposed.

Specifically, the most unskilled among us would be the ones sacked or, at the least, not hired by an employer due to their lack of skills.

A racist’s weapon

Minimum wage laws have had a way of entrenching racism, as well.

As economists Walter E. Williams and Thomas Sowell have extensively examined, the minimum wage has long been a tool for racist policymakers because of its effect on unemployment.

One such example in the U.S. is the 1931 Davis-Bacon Act.

The act itself was initiated on behalf of white union construction companies, who were wrought with anger at having their businesses frequently undercut by predominantly black non-union companies.

In addition to the implicitly racist results of implementing what was essentially a smaller scale minimum wage, the act garnered explicitly racist proponents as well, including U.S. Rep. William Upshaw.

“You will not think that a southern man is more than human if he smiles over the fact of your reaction to that real problem you are confronted with in any community with a superabundance or large aggregation of Negro labor,” Upshaw said on the U.S. House floor.

American racists were not alone in understanding the benefits, in their eyes, of imposing minimum wages.

Everywhere from British Columbia – where in 1925 a minimum wage in the lumber industry had the explicit intent and effect of pricing competitive Japanese immigrants out of jobs – to South Africa – where white labor unions begged wage laws to be applied to all races to prevent black workers from “taking” jobs from unionized white workers due to being willing to work for less – racist policymakers have flourished implementing minimum wages worldwide.

Helping few, but not the poor

Another fun fact about the minimum wage, although it might seem blasphemous to say on a college campus, is that almost nobody in the United States actually makes it.

Of those who actually do, the majority are middle class youths or teens.

The Bureau of Labor Statistics reported in 2012 that 3.6 million workers are paid at or below the minimum wage nationwide. For those counting, that’s approximately 2.5 percent of the total workforce and 1.5 percent of the potential workforce.

Of those in this group, 31 percent are teenagers and 55 percent are 25 or younger.

A mere 0.8 percent of Americans above the age of 25 make the minimum wage.

As would be expected when discussing largely teenagers/entry-level employees, another study found that workers who earned $9.50 per hour or less (mind you, the federal minimum wage is currently $7.25), a whopping 63 percent were either the second or third income earners in their family.

Meanwhile, 43 percent of these same workers live in households that earn $50,000 or more per year.

That’s probably also why it was discovered in that February CBO minimum wage study that about 47 percent of all $10.10 minimum wage gains would be for households earning six or more times greater than the current poverty level.

In other words, most gains from raising the minimum wage do not even go to the poor, the policy’s intended beneficiaries.

Why the support?

As a reporter, it is a heck of a lot easier finding some thrilled college kid who received a pay bump than the poor, unskilled lad who unfortunately remains unemployed because employers cannot afford to hire a new worker.

Generally, that same college kid is also more likely to be politically active and therefore better represented than someone who is unskilled and poor.

More importantly, both sides on this issue are likely unaware and simply uneducated in terms of what unseen damage minimum wage laws can inflict upon those who may be the worst off among us and/or searching for their first job.

Ultimately, a minimum wage increase will likely continue to have support support as long as individuals focus — and reporters write — on only the “seen” effects of such a policy.

Politicians will then continue to favor increases, not necessarily because they care, but because they tend to favor any policy with 71 percent of the public’s support.

As an individual who identifies as a liberal, there are certainly far superior ways in which we can actually help the poor.


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