10 of 13

Write now Article Tools

Minimum Wage Increase: Good Deed or Bad Policy?
America began as a place to escape religious persecution. It is still such a place; however, America is now better known for being the land of opportunity. Millions upon millions of people have left their homes in other countries and have come to America to pursue the elusive "American Dream." People in America have the freedom to succeed; they also have the freedom to fail. There are many well-intentioned and kind-hearted people who believe that failure should be outlawed by our government. These people believe that by raising the minimum wage from $5.15/hr to $6.65/hr they can effectively erase poverty and failure. Nothing could be further from the truth. Raising the Federal minimum wage will cost most Americans money while failing to help America's impoverished people.

An increase in the minimum wage will cost jobs, raise prices, and benefit few. Most businesses and industries today operate on extremely tight budgets; consequently, an increase in payroll would present a dilemma for them. The dilemma would be whether to cut operational cost or pass the increase on to the consumer (you and me). When Congress raised the minimum wage in 1996, they did both. Doug Bandow, senior fellow at The Cato Institute, estimates that around 300,000 jobs were lost as a direct result of the 1996 minimum wage increase; in addition, Mr. Bandow also attributes a 4% price increase for goods and services to the 1996 minimum wage increase. This 4% price increase affected every consumer; however, the wage increase only benefited 3% of the workforce. The combined effect produced an ipso facto tax of sorts where consumers footed the bill for the minimum wage increase; furthermore, of the 3% who did benefit from the minimum wage increase, the U.S. Department of Labor reports that 50% are single and 25 years old or younger, 25% are teens, and 5% are over 65 years of age. In the end, the 1996 minimum wage increase cost thousands of jobs, raised prices for goods and services, and provided a temporary benefit to a very few individuals.
The most popular argument in favor of a minimum wage increase is that inflation has eroded the 1996 minimum wage increase. This argument portrays inflation as some mysterious force of unknown origin that appears and devours the unsuspecting minimum wage workers paycheck. The reality is that inflation is a very predictable reaction to several factors, one of which is increased labor cost. The inflationary

• 1
• 2
• next page >>

Add your voice

Know something about Arguments for abolishing minimum wages?
We want to hear your view. Write now!