The Minimum Wage Calamity
The issue is not wages, it’s jobs…
[Ray Haynes] 1/4/06

As the year begins, we find Sacramento once again considering raising the minimum wage. Only this time, Governor Schwarzenegger has indicated he might support a bill raising the minimum wage to $7.25 next year, and $7.75 the year after.

In the wake of high energy costs, high building costs, high liability insurance costs, and workers’ compensation reform that doesn’t reduce costs nearly as much as we need to, we cannot afford to drive up the costs of doing business in California even higher. Even if you do not pay the minimum wage to more than a handful of employees, the inflationary impact it has on the entire salary scale can be significant.

The current federal minimum wage is $5.15 per hour. In California the minimum wage is $6.75 per hour. Left wing political rhetoric has succeeded in confusing the people into thinking that a ‘wage’ is an entitlement, not the price that the worker is worth in the marketplace for the job performed, the skills possessed, or the desirability of the worker to the employer. I think it is time we remind ourselves that wages are, in fact, a price paid for labor.

Everyone is familiar with the harmful economic effects of arbitrary government price controls in other aspects of the economy. Rent control results in fewer rental units. Price control on any goods results in fewer of those goods. Price control on labor results in fewer jobs.

It is an emotionally charged issue, which fails to take into account the ‘side effects’ of the law. If an employer has to pay an employee more than that employee produces for the company, the employer is losing money. So either the employee is fired, or the company goes bankrupt. Either way, the employee loses the job. This is government forced unemployment.

A forced minimum wage deprives the workplace of some lower skilled workers who would be capable of rendering beneficial services to an employer if that employee were allowed to be paid what his effort was worth, making that employee a productive member of society. The worker has been deprived of independence and self-respect which comes from self-support, even though he or she would otherwise be willing to do the work at a lower wage. Even worse, the best way to get a higher paying job is to do well at a lower paying job.

According to an analysis produced by the National Center of Policy Analysis, “The primary cause of low income, …, is no wages, not low wages.” They conclude that most of those who earn low wages are either teen-agers or other secondary earners spread rather evenly across the income distribution scale. According to a summary of their analysis, “While the single mother trying to support her child on a full-time minimum wage job is a better story, the 16-year-old hamburger-flipping student with college-educated and employed parents is a better fact.” Low-income families have a large number of people without jobs and without the skills to get a job. A mandated minimum wage forces them even further out of the job market.

Increasing the minimum wage increases the cost of goods and services, forcing many of the people who lost their jobs as a result of this government intervention to either pay higher prices, or do without. The government has deprived them of a job they could perform, and which would form the basis of further training to acquire higher wages, and has increased the price of goods that they might otherwise have been able to buy. All of this is sold to the public in the name of helping the poor. Some help!

Low-income families do not benefit from a minimum wage, and neither does the taxpayer. Once again we will consider increasing the cost to employers in California for a program that has never shown any legitimate long-term benefit to “the poor”, and that has far more often been shown to be a detriment not only to employers, but to the very “poor” the program is supposed to help. After all, you can only make the minimum wage if you have an employer who is providing a job. -CRO-

Mr. Haynes is a California Assembleyman representing Riverside and Temecula and frequent contributor to CaliforniaRepublic.org.

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