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Dear AJC Editor:
This letter is in reference to recent stories about Republican
willingness to pass a higher minimum wage. Raising the minimum wage is a bad idea and here’s why.
The numbers that follow are for illustration only. Let's say an employer is willing to pay $50 per day for the labor or value an individual
provides. This mutual accommodation is the backbone of free enterprise
and a capitalist society. The worker willingly provides labor for the
amount of wage the employer offers. Wages are a price paid for a
service. If you set a minimum wage you are fixing a price.
Now comes a government edict that all individuals making $50 per day must receive $60 per day for their labor. Employers, like any good consumer, will study hard to see if the labor they receive is really worth the wage or price they must now pay. This will have multiple downstream affects on
the individual, the employer, and everybody they come in contact with.
The labor saving technology not previously purchased by the employer will become more affordable. Even without technology, many employers will not be willing to pay more than what the labor offered is worth. If the
labor is essential to their business, they may have to pass the $10 extra
cost on to their customers. If this happens, the customer loses the
purchasing power of the $10. This reduces demand for other products and services by $10. The same thing happens if the employer elects to absorb the $10. His
ability to purchase products and services is reduced.
Since some employers will elect to purchase labor saving technology with the $10 they are being forced to spend, demand and employment in the technology industry will increase. The $50 per day employee lacking the ability to offer skilled labor will find fewer job offerings. An individual willing to
work for $50 per day is now unable to offer his services for the amount they are worth. This individual will be pushed toward public assistance. The taxpayer will subsidize this person with $35 per day. The net result of the price fixing is zero wealth has been created. It has merely been transferred.
Some people and industries may be better off and others may be hurt. The success or failure of any product or service can be determined by the free market or by government edict. Recent history has shown that free market principles are more effective than command and control. This is being taught in most of our universities.
If these arguments are unpersuasive, consider this. Unemployment is low. Everywhere you go businesses are trying to fill vacancies. Ask yourself if you really believe employers are paying less than what the market will bear.
Washington politicians either don’t understand what they are doing when they propose raising the minimum wage, or they don’t care. Just remember, this is an election year. I think they’re buying votes and don't care if they’re screwing around with our economic freedom.
Wes Alexander
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