Policy Spotlight: Minimum Wage

This will be the first of a semi-regular feature here at The Conservatory. Every so often, I’ll post “Policy Spotlights” focusing on a particular issue currently in the news (such as gun control, immigration, or the minimum wage), and discuss and defend my own views on that issue.

The question of raising the minimum wage has long been seen by Democrats as one of their most effective wedge issues, peeling away working class votes from Republicans while solidifying their base of poor, urban, and primarily minority voters. But like so many other liberal policies, raising the minimum wage—though it purports to help the poor and working class—in reality hurts them the most, leading to a one-two punch of lost jobs on the production side, and higher prices for goods and services on the consumer side.

The minimum wage is perhaps one of the prime examples of how government intervention and interference in a free market economy stifles economic growth and productivity. As the government, whether federal or state, raises the minimum wage, companies are forced to spend more and more money to pay their existing workers. Any thoughts of expansion or of hiring new workers are quickly discarded, and soon, merely to break even, companies are forced to let people go.

And the first workers to leave are the lower skilled, disproportionately poor and minority workers, whose jobs are by definition the easiest to be performed by a smaller number of people. Lower-skilled, entry-level jobs—those most likely to earn minimum wage and therefore most likely to be affected by any mandated wage increase—are consolidated, under the basic principle that either some of the lowest skilled jobs are cut, and a few people lose their jobs; or else the company keeps every such job, paying an increased salary, and face negative profit earnings—and with it, the potential that the entire company will fail, causing everyone to lose their jobs.

So, many poor, working-class, and minority workers become unemployed through the increase in the minimum wage. But this won't be the end of their hardship, because they still have to buy goods and services, as consumers, and participate in the marketplace from the other side as well. And here is where the other angle of a minimum wage increase becomes apparent, because even after cutting some jobs, many companies will still face an increased drain in resources.

To attempt to make up for this, and avoid having the entire company fold or become unprofitable, they will be forced to raise prices on goods and services, with any additional revenue going directly to those increased wages. This will hurt all consumers, of course, but the ones hit hardest will be the recently unemployed, those who may have had a difficult time paying for an increase in product prices even had they not lost their jobs to the effects of a minimum wage increase.

And still, even with all these measures, many small businesses will likely still be forced to close at some point after sustaining unacceptable losses. The number of businesses that would close, along with the number of jobs lost and the amount of price increases, would of course depend on the exact amount the minimum wage was raised. Hillary Clinton’s proposed $15 per hour minimum would hurt businesses, workers, and consumers alike, but this would pale before Elizabeth Warren's onetime proposal of an increase to $22 an hour.

Of course, a government mandate of a variety of additional worker benefits such as paid family leave, which would in effect act as a second minimum wage increase, would make the effects even worse. There's a reason that in Los Angeles, and many other places where workers have succeeded in lobbying for an increase in the minimum wage, businesses that initially supported the movement are regretting their actions, and unions are lobbying for their members to be exempt.

Meanwhile Donald Trump has predictably attempted to take both sides of the issue, from categorically opposing a minimum wage increase during the primary to championing higher wages for workers and seeming to support minimum wage legislation at the state level, while leaving his official stance ambiguous on a federal raise.

While this relentless flip-flopping is by now Trump’s expected position on virtually every issue, conservatives should embrace the minimum wage issue. Boldly making the case that raising the minimum wage hurts, rather than helps, the economy and low-income workers will finally begin to counter the simplistic liberal narrative on the minimum wage with real facts, rather than the more common incoherent rambling—good from both a political and policy standpoint.