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Minimum wage raise is not the way to increase wages and create new jobs

Minimum wage increase is not the way to create jobs and raise wages
Minimum wage increase is not the way to create jobs and raise wages
http://rationalpolicy.com/

The far left is pushing again for an increase in the federal government mandated minimum wage. When we hear this we can look at the calendar and know that an election is around the corner, because Democrats will trot this old issue out to motivate their base to turn out on election day. But whether this is just a political campaign or a real attempt to pass pubic policy, the issue itself still deserve some examination. Regarding the issue itself, having in place a government-mandated minimum wage is not itself the best way to insure higher wages and salaries for working people. And, raising it will not create any new jobs in this time of excessively high unemployment, it will actually kill jobs and create more unemployment.

First let's look at what happens any time a government-mandated minimum wage is raised. Nearly all jobs that actually pay minimum wage are entry-level jobs, which means the market has determined that the labor being hired for those jobs is of value of the minimum wage or possibly lower. And most of those jobs are part-time jobs held by teenagers or young adults. They are also the jobs most likely to be replaced by techology and automation. So if you want McDonald's workers to make $15 per hour soon you'll see fewer humans and more machines making your Big Macs at McDonalds.

When employers have to pay a higher government-mandated minimum wages, they will hire fewer employees and find a way to operate with a smaller staff. This is economic fact, regardless of what the spinners on the far left say when they claim that raising the minimum wage will not kill jobs. Staff reductions by employers will inevitably lead to higher unemployment. With even more unemployed workers not working, and more of them collecting unemployment benefits and/or welfare, the cost of those government programs rise while those paying the taxes to fund them, decreases. This only further weakens the economy and causes yet additional unemployment.

Even if we have a government-mandated minimum wage, and/or raise it, wages are still largely set by the market. This will always be largely true no matter how much the government, and social engineers on the far left, try to control this. The free market is a natural consequence of civilized society, it's not some scheme cooked up in the back rooms of big business by the likes of the Koch brothers, as the far left might have us believe.

The components of the free market that generally determine wages are the supply and demand for labor. Increased supply of labor against demand will drive wages down while increase demand for labor will drive wages up. This is economic fact, regardless of what one's political ideology is. Those statements are as factually true as saying that rainclouds produce rain or snow or sunshine warms us up during the day.

At a more basic and simple level, consider what happens if you need your computer fixed and there are 20 people you know in town that can fix it for you. Those 20 will compete against each other, trying to offer you lower rates and/or better services to convince you to hire them. All 20 of them need work and you need your computer fixed, so they compete until one of them convinces you to hire them. That's good for you, and tough for them to complete with such a surplus of computer repair labor available to do just one computer repair job. Let's say 18 of those 20 change careers next year and only two are left in your town still in the business of repairing computers. But by then, you and 30 others in town need your computer fixed. Now there's a shortage of computer repair labor and a surplus of work. Now you and the other 30 will have to offer to pay more to get your computer fixed before others do, since there are now more jobs available than computer repair technicians. Now that is good for them, they will now make more money on each job they get hired for. So you see, a labor shortage raises how much we get paid to do work.

So if we really want to effectively raise wages and still create jobs, we need policies in place that favor a labor shortage. We have a huge labor surplus in the United States right now, in part due to currently high unemployment, but largely because of all the unemployed we import in the form of both legal and illegal immigation. Think about it in common sense, the economy doesn't create enough jobs for our citizens, so isn't it entirely insane, economically, to bring in another million or more immigrants every year who will also need jobs? Simply put, immigration is importing more unemployment, and right now we have way too high unemployment when calculate in real terms and not government made up fictionary numbers. And all of this importing of unemployment via immigration is only creating an even large labor surplus, which drives market-based wages even lower. And if the government responds to those forces by mandating higher wages, the consequence is more unemployment that leads to an even more disproportionate labor surplus. In other words, the progressive solution of the left, as always, causes more of the root cause of the problem they seek to address with government force.

The path to true prosperity for all, increased job creation and a labor market that natually increase wages is only through economic policies that spur a labor shortage, not a labor surplus. And the quickest and most effective way to that, is if we immediately put a moratorium on legal immigration, and enforce the borders to stop illegal immigration. Once we stop immigration for long enough for the economy to create enough jobs for all that want them, we will see the labor supply decrease and when it crosses the line into labor shortage, that shortage will begin to force, via supply and demand of the free market, employers to pay higher wages in order to get enough employees. Higher wages will encourage more to go back to work, and give up the welfare or unemployment checks, when a job pays more than those do as well. More people working will increase consumer spending and tax revenues, which will lead to jobs being created.

Cutting taxes and regulations on businesses will also cause more jobs to be created, and when the economy creates more jobs and we don't import more unemployment via immigation, then we come closer to achieving a labor shortage. And that in turn leads to higher wages, not government-mandated wage increases.

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