Recently one of my sons, over hearing a news story about minimum wage, asked me the question, “dad, why is minimum wage so low?" I was surprised he knew what minimum wage was, but was glad to have the discussion with him. I asked him, “how low is too low?" He said it was “around 5 bucks. " Pretty close, it is $5.15. I asked him why he thought it was so low. He said “it is not enough money. " I said, “no, why do you think they set it at such a low rate?" “Oh, I don’t know. It would be great if it were $10, $20, or even more an hour. " I asked, “What if the job is not worth more than $5.15 an hour?" He looked puzzled. “I guess the job would go away. " “So if Congress raises it to $7.25, what happens to jobs worth less than that?" He now looked concerned. He said, “gone too?" Than he asked, “why do they have minimum wage at all?" I think he is getting it. Congress is arguing that, after a decade and a strong economy, it is time for an increase. Furthermore, many Republicans have gotten on the bandwagon in order to come across as being for the “little guy. "
Many economists are minimizing the negative impact, saying that the economy can absorb the increase. But historically, such increases have led to increases in unemployment for the people that are suppose to benefit most from such a policy – young people, minorities, and the under skilled. There have always been increases in unemployment with increases in minimum wage and they have always been shouldered by such groups.
Furthermore, the problems won’t end there. My wife, who is far more perceptive when it comes to economics than most Members of Congress remarked, “this is going to increase prices" and “whatever amount people get in increase wages will be eaten up with higher costs. " She understands that costs are derived by several key factors and one of the biggest is labor. When labor costs go up, so do prices. Good-bye higher wages.
So who are the chief beneficiaries of a minimum wage increase? The first are the politicians who will likely convince voters of their compassion through passing this wage increase. The second is the government, which will probably enjoy increased revenue because of higher sales (and in some cases, income taxes) because of the higher costs that will follow.
The losers will likely be the very people this is suppose to benefit – young people, minorities, and the under skilled. Minimum wage, minimal thinking, we certainly deserve better in our land of opportunity.
Kevin Price is Publisher of the Houston Business Review at http://www.HoustonBusiness.com , he writes frequently at http://www.bizplusblog.com , and hosts the Houston Business Show on CNN 650. He is an award winning author as well. His works have been published in Chinese, Russian, Polish, and several other languages. He has spoken coast-to-coast and around the world. He was chosen an Outstanding Young Man of America and has twice been published in Vital Speeches of the Day. He lives with his family in Houston, Texas.