Minimum Wage, Just Another Subsidy
One petty pet issue that drives me nuts is minimum wage. It’s to Democrats what banning gay marriage or abortion is to Republicans, which is to say, a media-LOUD self-defining pet issue that speaks to the constituents, but offers the country very little. It’s more gang banger war cry than sound argument. But regardless of how our little pre-bribed congressional imps fought about it, you can rest assured it will only happen 7 years after voting themselves raises totaling $31,600 each (oh if only it were a joke.)
Indeed there is much debate concerning the minimum wage. You have the infamous Card/Krueger study (criticized for flawed data), the Neumark/Wascher response with a supposedly correct dataset, but yet another Krueger/Card response to that. You have Think Tanks cherry picking research that supports their own conclusions, an outright propaganda bloodbath with no regard for impartiality.
So if you have enough research to support either side of an argument, how can you argue? If raising the minimum wage doesn’t create unemployment, as was previously thought and taught in econ 101 classes, then is it a good idea? On one hand just the faint whiff of government involvement/tinkering with free market economics should have us running. And if raising the minimum wage has little negative effect on employment why give more money to then take it away via taxes? Why not just eliminate taxes, or eliminate them for minimum wage workers, instead of forcing businesses to give subsidies to the lowest wage earners? It doesn’t make sense.
Economist Stephen E. Landsburg argues that regardless of the outcome, and according to him most economists agree that the minimum wage has little effect on employment one way or another, it’s basically a crude subsidy and there are better ways to do subsidies if you must do them.
Ordinarily, when we decide to transfer income to some group or another—whether it be the working poor, the unemployed, the victims of a flood, or the stockholders of American Airlines—we pay for the transfer out of general tax revenue. That has two advantages: It spreads the burden across all taxpayers, and it makes politicians accountable for their actions. It’s easy to look up exactly how much the government gave American, and it’s easy to look up exactly which senators voted for it.
By contrast, the minimum wage places the entire burden on one small group: the employers of low-wage workers and, to some extent, their customers. Suppose you’re a small entrepreneur with, say, 10 full-time minimum-wage workers. Then a 50 cent increase in the minimum wage is going to cost you about $10,000 a year. That’s no different from a $10,000 tax increase. But the politicians who imposed the burden get to claim they never raised anyone’s taxes.
If you want to transfer income to the working poor, there are fairer and more honest ways to do it. The Earned Income Tax Credit, for example, accomplishes pretty much the same goals as the minimum wage but without concentrating the burden on a tiny minority.
Ultimately, the minimum wage just doesn’t make sense. They government gives away money that isn’t it’s own (interfering with the free market contract between employer and employee.) This strains businesses, and passes costs to the consumer, regardless of it’s effect on employment. Then the government taketh away in the form of taxes. And please, don’t give me the sob story about not having enough federal budget money to pay for all those bridges to nowhere.