It takes a great deal of economic obtuseness and a fair amount of arrogance to assume that a third party can determine the right beginning wage for every job, in every business, in every industry. But that never keeps social activists from trying.
The benefit of a higher minimum wage is obvious: low income workers earn more. But there are other important consequences that aren’t as obvious and are easy to ignore. These include higher prices, at least some layoffs, fewer hours for employees, reduced benefits, and slower job growth. Some smaller businesses may be forced to move or close.
The composition of the workforce also changes. Employers can be forced to pay a higher wage, but they can’t be forced to hire employees whose educations, skills and experience don’t allow them to make a contribution equal to the required wage. This means that individuals who need work and experience the most may be priced out of the market.
The demand for labor is already raising wages for many jobs. This is the way markets work best, and legislators should resist the temptation to meddle and run the risk of doing more harm than good.
Martin Jones
Freeport
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