Mark's Quill

Minimum Wage Hurts Workers & Economy

Every economy revolves around several factors whereby the wealth generation baseline is established by the ratio of cost to profit.

There are many contributing factors to the cost:profit ratio but the primary ones include:

• The amount of labor required to produce a product/service
• The minimum required skill level of laborers
• The volume of labors possessing said skill level that are available to work
• The minimum pay required to retain laborers with said skill level
• The prevailing selling price of the product/service according to demand

The above factors are what allow a “free market” economy to prosper and produce continuous growth. When one introduces an artificial change in any contributing factor, it triggers cascading detrimental disruptions to the "free market" economic system.

In the case of a minimum wage, the amount of artificial change to unskilled labor costs is the primary driving factor determining the baseline level of inflation. When labor costs increase across the board, the cost of producing the product/service increases proportionally … this is called “inflation” because the change was reduction in the purchasing power of the money.

At the time this is written, the current Federal Minimum Wage is $7.25/hour and the socialists are proposing a 107% increase in the Federal Minimum Wage to $15.00/hour which will in turn produce a 107% labor cost increase across the board in all industries. One must also consider the repercussions this will have not only on the wealth generation baseline but also on the overall economic/labor structure whereby the increases in operations costs will effect major detrimental changes to overall welfare of both moderate and low-income workers. Numerous business economists have evaluated the effects of major increases in the Federal Minimum Wage and their predictions have been confirmed to be accurate by the results observed following Seattle's choice to increase their Minimum Wage.

In Seattle, the primary immediate effects were felt by food and hospitality workers. Instantly it became necessary for businesses to cut operational costs across the board in order offset the government-mandated artificial labor cost increase. Immediately workers lost most or all of their perks such as being allowed to consume food and drink while working as well as employer provided insurances, daycare and parking. Many companies reduced their payrolls in addition to cutting hours and overtime. The net effect of increasing the Minimum Wage resulted in everyone's cost of living increasing but lower income workers are bearing the most substantial cost of living increases.

The fastest way for an employer to cut labor costs is by reducing the number of employees and current estimates show that if the Federal Minimum Wage is increased to $15.00/hour the economy will immediately shed well over a million jobs low-income jobs and an additional three million jobs across all other income classes. We have nearly eight decades of statistical data clearly showing the detrimental effects of a minimum wage on economic stability and growth. The only way to increase the standard of living for everyone is to allow the free market to be free from government manipulation. Anyone who is serious about increasing the standard of living must first understand that all standard of living increases are a byproduct of increased in a country's economic strength and stability. A country increases it's economic strength and stability by allowing the free market to generate wealth and as the market grows, so grows the people's standards of living.

Unfortunately, what we have here are a bunch of politicians, most of which have never had a real job and know nothing about wealth-generating businesses, instituting mandates that have a consistent 100+ year history of repeated failure! If politicians were serious about implementing positive change, they would stop punishing achievement by stifling wealth-generation.