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Minimum Wage: A Well-Intentioned Hindrance

The idea behind the minimum wage is simple: help the downtrodden by forcing

companies to pay workers more than they are worth. This idea is one of good intentions

but poor logic. With its establishment in 1938, the benefits of a minimum wage are

disputably nonexistent (Will A17). While the minimum wage was set in place to help

protect the least skilled and lowest paid workers, it has proven to do just the opposite.

The minimum wage should be eliminated due to the numerous reasons that cast the few

benefits in shadow.

Unemployment is the foremost consequence of a minimum wage. It is a widely

accepted fact in the economic world that supply and demand varies based on price and

quantity. For the sake of argument, fictional company XYZ has a ten-thousand-dollar-

per-month salary budget for its employees. Without the minimum wage in place,

employers would pay their employees the market rate of five dollars an hour. At this fair

rate, company XYZ would be able to hire twelve employees working forty hours a week.

If a minimum wage was imposed and company XYZ was forced to pay its employees

seven dollars an hour, they would only be able to hire eight employees instead of the

previous twelve (Liebler 1). Therefore, four employees would be unemployed due to

minimum wage and company XYZ loses productivity and efficiency. According to an

article written by Bruce Bartlett of Human Events Online, “A study of the 1996 and 1997

increases [of minimum wage] by economists Richard Burkhauser, Kenneth Couch and

David Wittenberg also found a 2% to 6% decline in employment for each 10% increase in

minimum wage” (Bartlett 3).

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Another aspect that should be considered is who the minimum wage is actually

affecting. According to George F. Will of the Washington Post, only twenty percent of

workers earning minimum wage live below the poverty line. Of the 1.9 million earning

minimum wage, more than half are under twenty-five years of age while more than a

quarter are between sixteen and nineteen years of age (Will A17). Additionally, as stated

by Jim Saxon in his May 1996 Joint Economic Committee Report, “Only 2.8 percent of

workers earning less than $5.15 are single parents. Only 1.2 percent of all minimum

wage workers were adult heads of households with incomes less than $10,000. Fifty-

seven percent of minimum wage workers are single individuals, many of them living with

their parents” (Saxton 1). It is an undisputed fact that many of these individuals are

students who often are only working part time. From these clear statistics, one can draw

the conclusion that an elimination of minimum wage would only dramatically affect the

lifestyles of a very small number of individuals.

With respect to the teenage workers, the minimum wage is a vice that bars their

entrance into the workforce. Teenagers, who are often the victims of unemployment due

to minimum wage, are prevented from gaining work experience that is crucial for their

social and personal development. These entry-level jobs, which are usually given to the

young and unskilled, are jobs that teach persistence, patience, and the importance of

being on time. In addition, by implementing a minimum wage, the bottom rung of the

economic ladder is removed leaving entry-level workers stranded with nowhere to

advance (Bartlett 4). Through these poor paying, unskilled jobs, entry-level workers

learn the value of a dollar and that discipline and hard work are rewarded.
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Another way minimum wage affects teenagers is work appeal in comparison to

school. Shortsighted, inexperienced youths might see a minimum-wage job as more

enticing than a high school education. Statistical studies performed in states that allow

students to quit school before the age of eighteen have shown that a ten percent increase

in the minimum wage causes a two percent drop in teenage school enrollment. Without a

high school diploma, that person is almost always condemned to remain in the same

economic situation: the very bottom (Will A17).

Without minimum wage the incentives to gain a higher education are much

greater. If it were somewhat comfortable to live at the poorest end of the spectrum, many

people would settle for that. Students would not work as hard in school, and college

attendance would decline. By having no minimum wage, the poorest end of the spectrum

is something no one will settle for and work harder to avoid. College attendance will

increase leading to deeper, more thorough research and advancements in the science and

technological fields. This, in turn, will advance both the United States’ society and

economy in relation to competing nations.

Minimum wage is also a major factor that works against America’s economy. To

quote an article written by Bruce Bartlett, “Small businesses create 75% of new jobs

annually, but they are also responsible for most job losses.” Due to minimum wage,

many small businesses go under because they are not able to pay their employees the

amount dictated by the federal minimum wage. Fifty-four percent of minimum wage

workers are employed by companies with fewer than one hundred employees, and sixty-

six percent are employed by companies with fewer than five hundred employees (Bartlett

2). Clearly, small businesses are crucial to the economy and the minimum wage workers
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who are provided with jobs by them. If the federal minimum wage were eliminated, the

vast number of small businesses would pay their employees the amount determined by

the market for that region. In this way small businesses would be able to remain in

business and provide jobs while employees are getting the correct compensation for their

work.

However, with an increase in globalization comes an increase in outsourcing.

American companies are being forced to send jobs overseas to workers who will work for

less leaving helpless American workers unemployed. American businesses are doing

this, not because they are opposed to America but because they are forced to do it in an

effort to cut costs. Minimum wage almost encourages companies to hire foreign workers

while making American workers appear expensively unattractive. This ultimately, as

stated before, leads to a displacement of American jobs (Messerli 3).

An elimination of minimum wage will allow companies to lower the price of

goods due to greater efficiency. In a perfectly competitive market, a firm must charge the

lowest amount possible or else it will be run out of business. This is because all of that

firm’s competitors are competing homogenously. If one firm is charging higher than the

rest, no one will buy from them and, instead, will buy from one of the competitors

because it is cheaper. With an elimination of minimum wage, businesses will be able to

cut labor costs and, as dictated by the market, will be forced to lower the prices of their

goods. The lower pricing of goods is undoubtedly better for society, but it also caters to

the workers who are now working for less than minimum wage allowing their dollar to

go farther (Messerli 3).

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Supporters of minimum wage often claim that without it, companies would

exploit workers and abuse the labor market. In the past, especially during times of

recession, this has proven true; however, it would not be so much the case today. The

market is a force that should not be meddled with. Workers would most likely be paid

based on the living costs of the region they reside in and the demand for the position they

are working. If there were ten people competing for one job, each worker would lower

his potential salary in hopes of beating out his competitors. There comes a time,

however, when it becomes inefficient for any of the workers to lower their potential

salary any more. This is the market price for labor, and ultimately, the fair price that

should be paid for someone to do that particular task (Messerli 5).

Minimum wage is undoubtedly a mistake for both America’s economy, and this

nation as a whole. Like the Soviet Union’s command economy and rent control in New

York City, when government intervenes with a free-market situation, no good can come

of it. In the case of minimum wage, jobs are undoubtedly lost. This could be due to

foreign outsourcing, a company’s movements towards mechanized options, small

businesses failing, or companies increasing the workload of their already employed

workforce. Often, shortsighted and inexperienced youths find the benefits of minimum

wage to be greater than those of school leading to an increase in high school dropouts.

Workers who merely seek an entry-level job, from which they intend to gain experience,

are prevented from entering the workforce. The minimum wage increases living costs

and decreases incentives for a higher education. All in all, minimum wage helps a small

number of people while hurting a much greater number of citizens. Therefore, the

minimum wage should be eradicated.

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Works Cited
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Bartlett, Bruce. "Minimum Wage Is Bad Policy." Human Events Online 11 Feb. 2005 1-4.

22 Apr. 2007 <http://www.papillonsartpalace.com/miwnimum.htm>.

Liebler, James. "The Minimum Wage." Freedom Daily (1995) 1-2. 26 Apr 2007

<http://www.fff.org/freedom/1295d.asp>.

Messerli, Joe. "Should the Minimum Wage Be Abolished (i.e. Reduced to $0.00)?."

Balanced Politics. 08 Feb. 2007. 26 Apr 2007

<http://www.balancedpolitics.org/minimum_wage.htm>.

Saxton, Jim. "The Case Against a Higher Minimum Wage." Joint Economic Committee

Report: United States Congress May 1996 1-3. 23 Apr. 2007

<http://www.hous.gov/jec/cost-gov/regs/minimum/against/against.htm>.

Will, George F.. "The Right Minimum Wage." The Washington Post (2007): A17.