By Rob Janicki
I've previously written in economic terms about the fallacy of minimum wage increases as a means to increase upward economic mobility from the
poorer class to the middle class. Frankly it's getting somewhat boring
to reiterate what most people should already know, if they have ever taken a
course in economics. One of the concepts of economics involves
understanding the role of supply and demand, whether it's for goods or services
rendered in the local labor market.
When there are more people looking for unskilled work, than
there are jobs available for unskilled labor, the labor market forces of supply
and demand pushes the prevailing wage rate down. Conversely, when
unskilled jobs exceed the supply in the local labor market, wages will rise.
An example of this converse situation exists in North Dakota
right now due to the exploration and development in the newly discovered
natural gas fields. North Dakota's population is very low. With the
influx of natural gas field workers and other technical jobs related to the
natural gas fields, the demands on fast food businesses has skyrocketed.
It's reported that the wage rate at the McDonald's in North
Dakota is running between $15 and $20 dollars per hour for those unskilled
labor positions. It should also be noted that the pricing of McDonalds
food reflects the increase in labor costs.
Those high paying jobs in the North Dakota natural gas fields
can afford the higher costs for McDonalds food, as these individuals make more
money than the local residents of North Dakota.
The problem arises with the local inhabitants of North Dakota that
are not direct beneficiaries of that money flowing into the state. They
have had to cut down on the trips to McDonalds and what they can buy while
there, since the cost of going got McDonalds has risen rapidly in a relatively
short period of time.
The situation for the local residents is like an isolated hyper
inflationary action. Those residents not directly involved in the new
high paying jobs are forced to pay more for the same goods and services that
they had previously gotten for lower costs.
And, that micro economic example is what happens when it is
expanded to increasing the minimum wage within a state or across the country.
It's the poor who suffer the most from arbitrarily raising the minimum
wage. Only a very small percentage of the poor benefit from the increase
in the minimum wage.
Thus, the push for a substantial increase in the minimum wage is
an intellectually vapid, if not bankrupt, attempt to misdirect public attention
away from the growing failures of Obamacare.
2% of the jobs in America are minimum wage positions.
Minimum wage jobs are characteristically unskilled jobs requiring no
previous training or experience. Job training is performed by the
employer in simple steps leading up to increasing skill development across a
variety of job skills, which in turn leads to potential upward mobility in the
business operation.
Minimum wage jobs have typically involved single unmarried youth
and young people in their first employment opportunity. It is associated
with part time employment opportunities and never was intended as a means to
provide for family support conditions.
Raising the minimum wage by government fiat is a disruption to
each and every local labor market. It increases costs to employers and it
extends those costs to consumers, without increasing any employee productivity,
which might justify an increase in wages with a lowering of consumer costs
realized from the efficiencies of any increased employee productivity. It
just doesn't happen when the only variable is the increase in the wage rate.
Those jobs receiving minimum wage are associated with businesses
providing goods and services to, among others, lower income individuals.
Fast food businesses are frequented more often by low income individuals
that cannot match the cost of fast food businesses. It's these low income
individuals that will be most adversely affected by raising the minimum wage.
The conclusion is that raising the minimum wage is counterproductive,
since it adversely affects low income consumers more than any other group.
The proponents of raising the minimum wage want people to believe that
it's low income individuals that will benefit from raising the minimum wage.
The truth is that some few people will benefit from such increases.
The problem is that vastly more individuals will suffer financial detriments
from those same increases to the minimum wage. Where's the equity and
social justice in that outcome?
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