The False Promises of Minimum Wage Increases

When altering an economy by legislation one must consider not only the desired consequences of such action, but also those other undesirable consequences that will result from the action. While well-intentioned people may desire to raise the minimum wage thinking it will benefit workers, and while those currently holding minimum wage positions may be temporarily helped by the immediate increase in pay, the following are some of the undesirable results of the minimum wage increase.

1. It will be more difficult for those with no experience to find paid employment, as a higher wage will only be justifiable to employers where it dovetails with increased productivity or financial return.  It is already the case that unemployment in the 16-24 age bracket dramatically exceeds that of workers with more experience.  Raising the cost of young workers will lead to fewer opportunities for paid on-the-job training, or will encourage more creative uses of unpaid internships.  
    
2. Persons on fixed incomes that do not increase with the minimum wage will see their purchasing power decline.  To accommodate the mandate of a higher minimum wage, some businesses will increase prices.  Increases in prices by some will ease pressure on others to keep prices low, resulting in broader price increases.  Ultimately, it is the poor - precisely those that an increase in the minimum wage purports to help - who will be the hardest hit by these changes.
    
3. Smaller businesses that cannot as readily bear the burden of mandated higher wages are put at a further competitive disadvantage to their larger counterparts, ultimately resulting in less competition and potentially fewer jobs.  I note that some large businesses and labor groups express support for minimum wage increases while they already pay, or their members are already paid, well above the minimum wage.  Who do they seek to benefit?

Surrounding this issue, proponents often repeat the mantra that all workers be paid at a “living wage.”  However, there are some jobs which, while important, will never in a 40-hour week justifiably command in the eyes of employers or consumers wages sufficient to provide for all the needs of a family.  It is unfortunate that Maine’s economy suffers from a dearth of well-paying jobs and that Maine’s median income is the lowest among the New England states.  Rather than mandating increased wages for entry-level and “low-skilled” (as that term is used by the U.S. Department of Labor) positions in an attempt to make these jobs the equivalent of jobs for primary breadwinners in a family, the Legislature must create an economic environment that supports the creation of “living wage” careers.  Doing the former may help a few while it hurts many more, but doing the latter will help not only increase wages for some, but increase opportunities for all.