Mitch Stewart, Director of the Democrats’ “grassroots” campaign arm, Organizing for America just sent out an email update. As usual, he warns us of the evil “corporations and special interests”.
“Republican candidates for Congress are now saying they want to reduce, or even eliminate, the federal minimum wage,” he complains. “They’re talking about ending a law that protects American workers from unreasonably low wages. It’s a basic fairness that some of the people who want to control Congress simply don’t understand — Republicans like Linda McMahon in Connecticut, Rand Paul in Kentucky, and Joe Miller in Alaska.
Minimum wage is far from being a “basic fairness that some Republicans simply don’t understand”. Condemning “disbelievers” on grounds that they “simply don’t understand it” is laughable. The minimum wage exists for the sole purpose of redistributing wealth – something that has become one of the Democrats’ most dearly loved principles. Below is a summary of the policy’s problems:
- Two people wishing to make a contract are prohibited from doing so. For instance, if someone is searching for a job, and is willing to work for $5/hr, and a business owner is willing to pay him this, the contract cannot proceed because the minimum wage is $12.75/hr (here in New Zealand).
- Young people – historically preferable for low-skilled jobs will find it harder to gain employment. Because with the abolition of the youth wage, employers can hire more experienced workers for the same hourly rate.
- Minimum wage prevents employers from rewarding outstanding employees, because it is designed to cut down the “tall poppies”. It achieves this by promoting mediocrity. No longer can employers simply pay staff based on their skills or work ethic. Instead they are forced to pay lower-quality employees at a higher rate than their market value. And the result of this is that the higher-quality employees are paid less than their market value.
- Following on from this: hard-working employees will find it harder to gain a pay-rise as a reward for their effort, as they were either a) started off at their job at an hourly rate above their market value, or b) their employer cannot afford to give a pay rise as he is paying other staff at a rate above their market value.
- Minimum wage increases unemployment by increasing business expenses for employers, thus causing them to find ways of hiring fewer staff to make up for the fact that they are paying above market value for a number of their employees.
- Minimum wage distorts the balance in the market, as it causes the value of resources (i.e. man-hours) to be artificially raised or lowered.
The minimum wage should be abolished, giving individuals freedom to enter into any form of employment contract that they wish. This policy is unpopular, even in Conservative circles, however it is a sound “small government” liberal policy, while the alternative is out and out Socialism.