The Silly Side of Minimum Wages

The front page of the US print edition of the Wall Street Journal sports an article that expresses in simple language the fiasco thatcomes from a policy seeking to reduce inequality. The article, New Wage Law Raises Pay- And Tensions – explains what is happening in areas where organizations are adopting the socialist policy of raising minimum wages independent of productivity improvement.

Some of the tensions come about as those on the middle rung of wages, who have earned increases over time due to hard work and tenure, now see their rewards watered down. It seems unfair to them. Yet those same firms hearing of these complaints have little or no ability, or desire, to raise wages for all. And why should they, that would obfuscate the point of raising the minimum wage. Some people have left jobs due to their unhappiness at the so called, ‘wage compression’.  

The whole debate about minimum wage and its increase are all wrong. There is research that suggests that increasing such wages increase unemployment. There is research that suggests that some situations have successfully supported raising minimum wages without increased unemployment. Can we just call a pig a pig?

It does not take a PhD to realize that if you arbitrarily increase the pocket money for one child, there is less to go around for the others. It is as simple as that. Raising minimum wages is a socialist policy designed not to help the lowest workers in the rung but an attempt at redistributing wealth. At the same time it is argued that doing so puts needed spending power in the pockets of those that need it most – without any increase in productivity.  What rubbish.  The money has to come from somewhere.  As it stands such actions will effectively lower that most important key to growth, productivity. So the policy will actually misfire.  

We do need a minimum wage to help prevent abuse and a basic ‘living wage’. It does not need to be index linked (else it creates self-fulfilling inflation) and it does not need to be raised at a time when growth is anemic. We should instead focus on policies to drive growth that will spin-off surplus wealth to fund such wage growth- not the other way around.  

Now we are headed in the wrong direction and the very policy designed to help the less well off working man and woman will actually hurt then. No PhD required- just try running your household the same was as these ‘politicians’.


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