Taxes & Spending

Minimum Wage Bill Flawed

Contrary to what its supporters claim, the minimum wage bill Congress recently passed is unfair to workers and, in most cases, will harm the very workers it supposedly is designed to help. In fact, most workers will experience a minimum-wage penalty rather than a minimum-wage benefit because of this bill. This bill has far more to do with increasing the political capital of politicians in Washington, D.C., rather than increasing real wages of low-income families.

It’s important to realize minimum wage was never intended to be the sole income of a family and few minimum wage earners are the sole income earners in their household. Since 1998, the number of workers earning minimum wage has precipitously declined from more than 4 million to less than 1.9 million. Of those 1.9 million minimum-wage earners, 85% are teens living at home with their parents, adults living alone or dual-earner married couples.

Most economists agree a minimum wage actually leads to fewer jobs for unskilled workers. In a survey from the Journal of Economic Perspectives, 71% of economists at America’s top universities stated a minimum wage increases unemployment among young and unskilled workers. Moreover, the Bureau of Labor Statistics indicates minimum wage increases in 1990, 1991, 1996 and 1997 led to a decrease in employment among young workers. Our free market economy has proven time and again it is more effective and more efficient than the government in allocating resources.

The Founding Fathers gave states the power in our system of government to innovate and to serve as laboratories of experimentation for governing because they are more accountable to their citizens and responsive to local needs. In the very few instances when government steps into the market place, it’s more appropriately done at the state and local level. This is precisely what’s happening in regard to minimum wage. Twenty-nine states and the District of Columbia already have a minimum wage higher than the federal standard and another 14 states are considering proposals to increase their minimum wage above the federal level. The proposed increase to the federal minimum wage is another one-size-fits-all policy that violates the spirit of our Founding Fathers.

A minimum wage increase also would mean a reduction in benefits such as child care, housing assistance and food stamps for low-wage workers. For example, in Oklahoma low-wage workers are eligible for up to $25,726 in federal assistance. Under the minimum wage increase approved by Congress, these workers would find themselves eligible for benefits worth $4,600 less than they would under the current minimum wage. Yet, their newly increased wage would only provide an increase of $4,368 per year, resulting in a net income loss of $232 per year. The system is designed to provide for the needs of low-income families when their paychecks are not large enough to support them. It’s disingenuous for Congress to tout the minimum wage increase as helping these families when in fact it will harm them.

As a small businessman who has hired hundreds of employees, I know government regulations are both costly and counterproductive. The federal minimum wage increase certainly falls into both categories. To truly raise wages and spur economic growth, Congress should allow both businesses and individuals to keep more of what they earn through their hard work. Increasing wages does little for workers if the government continues to take away earnings. American families deserve an economy in which they can prosper, not more counterfeit compassion from Washington.

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