The Minimum Wage and Why It Hurts the Folks It’s Supposed to Help

Minimum Wage

As politically incorrect as it is to say so, from an economics stand point, people who work at the minimum wage level are a commodity. Yes, in this case, they are also people, but the laws of supply and demand, which the folks who insist on a government mandated minimum wage falsely believe that they can defy, don’t really care if they are people or not. Like soybeans, corn, and pork bellies, the price of the labor of an unskilled worker is set by what a commercial enterprise is willing to pay that unskilled worker and, until mandated minimum wage laws came into being, what that unskilled worker was willing to accept for his labor. As much as Democrats would not like to believe this….this is an economic fact.

So what happens to a worker who is only worth $7.50 an hour to an employer and is voluntarily accepting $7.50 an hour for his labor, and the government decides to mandate a minimum wage of $10 an hour? The employer has three choices: (1) pay the new $10 minimum wage to that worker and reduce the profits of his business,  (2) go out of business because the employer cannot make a profit paying the newly mandated $10 an hour minimum wage or (3) fire the worker and spend  money to automate the function that his unskilled worker previously performed.

The only way that the unskilled worker wins was option (1), pay the increased wage and reduce his employer’s reason for being in business…to make a profit. As the minimum wage rises as the political winds tend to force it to do, option (1) no longer becomes an option and either option (2), go out of business, or option (3), automate the job and fire the worker.

So as can readily be seen, as the minimum wage increases faster than the market value of the worker ( and that value is solely determined by the employer), the worker becomes unemployed when, ironically, he was willing to work for less than the government mandated minimum wage. The government will not allow him to work at the real market price of his labor. And the folks demanding increases in the minimum wage want the public to believe that they are helping this poor soul.

Now there is another side to this supply and demand law. We just discussed the demand price for labor. Many low skilled laborers are paid in excess of the government mandated minimum wage. Do we think employers pay more than the minimum wage just because they want to be “more fair” to their workers? Many on the left naively believe that. I would suggest that the reason they are paying more than the minimum wage to unskilled workers is because if they didn’t, no one would work for them.

Now liberal Democrat leaders really know what I have said above, even though they act like they don’t. They give as a reason for raising the minimum wage that a family of four simply cannot live on that…and of course they also know that virtually no people earning the minimum wage have a family of four. So why this hypocritical subtrafuge to keep increasing the government mandated minimum wage, pretending to help those at the lowest worker scale when it actually hurts them? The answer is that the unions always want an increase in the government mandated minimum wage. But they don’t work at the minimum wage, so why should they care? They care because their union contracts are often negotiated as a function of the minimum wage…..so if the minimum wage increases, their negotiated contracts call for an increase in their hourly wage rate.

The Democrat Party is in the pocket of the major labor unions because of their generous political donations to Democrat politicians. This is shown by the unions getting paid off by periodic increases in the minimum wage. While this helps the unions, it increases unemployment with the very young unskilled workers who urgently need work and are willing to work for less than the minimum wage. Teen agers are almost eliminated from the work place.

Ultimately if the minimum wage rises too fast, it will hurt even unions. The employers of union members will be faced withe the same options that the employer in my first paragraph had. And they too may become unemployed.

The point that I hope I leave the reader with is that much like the laws of nature, the laws of economics cannot manipulated by government without serious unintended negative consequences……and the Democrat myth that the minimum wage helps the lowest skilled worker is just that…a myth.

 

The opinions expressed in this commentary are solely those of the author and are not not necessarily either shared or endorsed by iPatriot.com.

Gordon A Uehling Jr

Graduate of U.S. Naval Academy in 1961. Two combat tours in Vietnam, one afloat, the other in the Mekong a Delta. I have been a sales executive with a computer terminal company, computer operations manager for a major NYC commercial bank, a Vice President at a major NYC savings bank and lastly the General a Partner of a financial limited partnership investing in deal arbitrage. For about 15 years I was a part time actor for commercials and industrial films and was a member of a small theatre company in Manahattan. I am still a member of SAG/AFTRA. I have a 44 year old son by my first marriage. I remarried in 2001 and my wife and I live in McLean, Virginia, where I have been retired for two years.

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