Minimum Wage: Do the Math


by Chris Shugart

Last month, President Obama decreed by executive order to raise the minimum wage for federal contractors. This week he continues to campaign for support of a Congressional bill that would raise the minimum wage nationwide. As the debate rages on, we are at least reminded of the math illiteracy we face in our schools and society. It also serves as evidence that the minimum wage proponents don’t really care about the math anyway—just as long as they can take credit for handing out more money to low wage earners.

The arguments offered by proponents are more political posturing than economic reality. To hear liberals tell it, it’s a policy so full of economic benefits that only a heartless miser could possibly object. Really, the argument pretty much ends there. In their liberal world, the employer‘s part in all of this is immaterial. Never mind that any wage increase must come from those paying the salaries. It’s a factor that’s just not part of their half-baked equation.

Increasing the minimum wage sounds like a good idea, as far as the argument goes. But that’s mostly if you’re on the receiving end of this government mandated generosity. Wages would increase for millions of workers bringing them above current poverty levels and thereby raising the national income. On the face of it, it sounds like a good deal.

However, this scenario ignores some important factors. First, the money has to come from somewhere, and that “somewhere” are the employers who are struggling to maintain their bottom line. How are they supposed to adjust their ledgers to meet the burden of a sudden and arbitrary increase in their cost of doing business? Liberals prefer not to deal in those kinds of trivial details.

And consider this other detail: Employees who were producing $10.10 an hour worth of work now find themselves earning the same amount as their new minimum wage co-workers. Has the value of their work suddenly become equivalent? Of course not. But it presents no problem for Congressional Democrats who can afford to live outside the economic reality in which the rest of us must reside.

According to the progressive think tank Economic Policy Institute, they expect 21.3 million employees would eventually get a raise as a consequence of the new minimum wage. In effect it would be a pay increase domino effect that minimum wage supporters would welcome. Raises for everybody!

All rhetoric aside, the minimum wage issue is merely another variation of the same old song loved by socialists everywhere—wealth redistribution. As an economic formula, the method is pretty simple: 1) Find out who has money. 2) Figure out a way to take it. 3) Convince voters that it will cost them nothing. And like most frauds, you’ll find that it’s a deal that’s too good to be true.