Why Raising the Minimum Wage is a Terrible Idea

by Darwin on February 13, 2013

The biggest problem with Americans today, and the politicians that pander to them, is that they make choices based on emotional effect and not on data.  This is why there’s no outrage over the budget-busting compensation of public sector employees like teachers, firefighters and police (yes, they all do important jobs, but the free market should dictate their salaries and compensation, not union thuggery and fleecing of the taxpayer), why nobody cares about all the stupid stimulus bills that had no impact other than to further increase our national debt (and hence, debt servicing costs), why people think price gouging is bad (gouging is GOOD) and of course, why Americans love a minimum wage.  To add insult to injury, Obama used emotional platitudes to highlight why America needs to raise the minimum wage yet again.  It is a terrible idea; here’s why:

  • Forced Overpayment for Labor – I’m sorry, but someone should be paid what they’re worth to the employer.  If it’s an absolutely zero skill job that just requires a body, why is the government mandating you pay them any set wage rate at all?  Think like an employer.  Consider a dishwasher.  There’s no prior experience required, no special skills and easily replaced.  Many restaurants use illegal immigrants for this type of role anyway, but let’s say they’re by the books and paying the full wage, payroll taxes (people forget about all the additional expenses business incur when something like this is proposed) and all the other costs associated with employing someone.  So, the free market would probably peg a job like that at something like $5 an hour.  But restaurants are forced to pay $7.25 due to existing minimum wage laws.  Now, you increase it even further to $9.  They’re not getting any additional productivity or profits for the money they’re paying; it’s just a government induced cost increase.  Well, one of two things happens here.  Either the profits must shrink forcing more restaurants out of business or they must raise their costs and pass it on to customers to maintain the same profit margins.  By passing it on to customers, this is essentially a tax on Americans (yet another tax increase).  You might say, “this is a typical argument and I don’t eat at restaurants”, but this applies to literally millions of jobs that touch goods and services you pay for.  From grocery store clerks to janitors, throughout the entire country, companies you buy from are going to have to pass higher costs on to you to support jobs that people were already perfectly willing to work at prevailing wages.  Teenagers take jobs at minimum wage all the time; now they’re getting an automatic raise just because their older college-age brother and sister voted for hope and change?  Unfortunately, the emotional appeal of helping poor people is getting in the way of reality and the unintended consequences.


  • I Thought Inflation Was Low? – Obama goes on to cite how tough it is to live on the current minimum wage, etc.  We’ve always heard these same arguments and even at $9, the same argument could be made.  So, why not just call it $15 an hour?  How about $25 and hour?  I mean, there’s no end to this philosophy.  On one hand, the government claims we have no inflation (see what the REAL Inflation Rate is with this real-life index) as justification to keep pissing away over $1 Trillion a year more than we take in, yet on the other hand, they’re citing rising costs and difficulty in raising a family as the need to increase the minimum wage.  Which is it?  Are things cheap in the US or not?


  • Handout Nation Has NEVER Been More Generous – There are entire books written on the topic, so I won’t go in to every nuance of the handout nation we live in, but just for starters, for a family living off 1-2 parents working the minimum wage, there are dozens upon dozens are various “government assistance” programs they’re already participating in.  When you hear about someone making $16K a year, there’s linear comparison whatsoever to say someone making $64K a year is “4 times better off” than them.  Yes, it sucks having a low income so don’t get sidetracked, but for reality’s sake, let’s consider all the additional benefits derived at that income level:  SNAP (foodstamps) to the tune of a few hundred bucks a month (could be say, $4-5K/year. Equating that to after tax income of a $64K earner, perhaps say, $7K equivalent). Someone at that income level pays no federal income tax. Free Obama phone.  Possibly housing assistance, health care assistance, various other forms of government assistance; the list goes on.


  • Buy Me a Robot – I’ve said it before and I’ll say it again – Robots are Taking Over.  Before you laugh off this futuristic threat, just consider thresholds.  We all have thresholds.  You might decide to pay the extra 5 cents a gallon to buy gas at the station on your street rather than drive a few miles down the road, but if the spead is 15 cents a gallen and you’re on empty, you’ll make the trip right?  I was willing to pay for installation of the new flooring we bought at the $.99 per square foot deal being offered but my wife didn’t want that material (of course). What she wanted was $1.99/ft, so I spent a weekend putting it in myself.  We all make decisions based on thresholds.  Well, the more you increase labor, especially no-skill labor that has ANY chance of being either outsourced or automated, the more we see outsourcing and automation.  Consider the dishwasher example.  If the costs of physical labor increase enough, perhaps eventually it makes sense to just buy more dishes and buy some high-speed dishwashers!  Consider a large building with 9 janitors.  If their wages go up, then maybe they need to lay one off and get more out of the 8 or cut back on frequency of cleaning some less traveled areas.  Whatever businesses have to do to maintain or cut their existing cost structure, they will do.  So in the end, this is going to cost jobs both for minimum wage workers, while extracting a tax from consumers further impeding the recovery.  Don’t you see?

In the end, this is yet just another ploy by liberals to redistribute more wealth from working, tax paying Americans and businesses to the young and lower socioeconomic class to curry favor and buy more votes.  Anyone opposing this measure will be painted as a rich asshat, a Romney, because they don’t want to help the poor.  The problem is, this is a net negative for the country but politicians don’t care about that.  It’s all about the next election.

What Are Your Thoughts on the Minimum Wage?

{ 16 comments… read them below or add one }

Funancials February 14, 2013 at 8:26 am

One of my favorite topics. I specifically love the inflation piece. Lets do everything we can to convince consumers that there is no inflation. And then let’s request a 25% increase in the minimum wage to account for the sub-2.5% inflation. Maybe Barack and Bernanke need to get their shit together.

The good news is that more people will lose their jobs, become more reliant on the government, the government will continue to grow as everyone blames this on capitalism.


Darwin February 14, 2013 at 9:48 pm

Totally the fault of capitalism. Michael Moore rejoice!


Investor Junkie February 14, 2013 at 10:46 am

Ironically the government is trying to create inflation (ok technically the FED), which hurts which group the most? Low wage earners. So what’s the fix? Increase the minimum wage to help that same group.

Which in many cases hurts the low income worker and does the exact reverse of the do-gooder intentions.


Darwin February 14, 2013 at 9:48 pm

They’ll always vote for the libs.


Brick By Brick Investing | Marvin February 14, 2013 at 12:12 pm

Great points and all very true. If there is little to no inflation why are we raising the minimum wage. Secondly I agree with you 100% that people should be paid what the employer is willing to pay. Unfortunately some people feel entitled to big screen tvs, smartphones, and McMansions. The ironic part is, when employers can no longer afford to pay minimum wage because it jeopardizes their business they ship the jobs overseas! SMH


Darwin February 14, 2013 at 9:49 pm

There will be that many more businesses and owners for Obama to criticize.


JT February 14, 2013 at 12:22 pm

I think it all ends with a simple question: if employer’s want to pay next to nothing for labor, why doesn’t everyone earn minimum wage?

Minimum wage jobs are minimum wage jobs for a reason. If it were just greed or indecency, everyone would earn minimum wage.


Chris February 14, 2013 at 2:49 pm

There is competition for jobs, that requires paying a higher salary. The minimum wage jobs have plenty of applicants, that is why employers can pay minimum wage. I imagine my employer would be happy to pay me minimum wage.


Darwin February 14, 2013 at 9:50 pm

At the end of the day, you should learn a skill if you want to earn more money. By voting Democrat, you get a forced pay raise no matter no non-existent your skill level is and no matter how easy the job.


Molly February 14, 2013 at 12:57 pm

I appreciate your article and your perspective! However, I think something that shouldn’t get lost in the discussion is that if families can actually earn a basic income, they will be able to afford to spend money, eat in the restaurants, and shop in the stores. Without adjusting minimum wage to a more appropriate level, the economy halts to a stand still.


Darwin February 14, 2013 at 9:51 pm

This same family is going to have that much more trouble buying basic goods and services that cost more because, well, businesses had to raise pricing to accommodate a higher wage. I just can’t get behind government meddling.


writing2reality February 14, 2013 at 1:18 pm

Couldn’t agree more! Politics today is filled with sensationalism and public relations mumbo jumbo, and it is only snowballing the level entitlement that currently exists.

The reality is simple, as you have said, that the businesses that can pass the cost on, will. And those that can’t pass on the cost, will then find a means to cut back on employees or outsource the jobs due to the even larger opportunity cost of not doing so.


Darwin February 14, 2013 at 9:52 pm

I hope everyone’s sending their kids to school to learn programming and robotics. This government is driving businesses toward more rapid adoption of decreasing their headcount.


Tim February 18, 2013 at 1:40 am

Now that you raise minimum wage, what is a persons worth who is skilled working for say 10.00 an hour? Is that to say it’s meaningless? To raise the minimum wage and not all wages across the board would make a person who has spent the time to get trained in a skill and who has been working with no raise insight feel useless. It must be across the board, but you know that employers who rule with a iron fist and threats won’t raise wages across the board but just laugh that he has a skilled worker at a cheaper wage.
Just my 2 cents.


Darwin February 19, 2013 at 12:14 am

Good point; now that person is either worth, well, barely above min wage. Or they’re now worth $11 or $12 which means their employer has to find a way to replace them, get more out of them, or go out of business.


Adam April 10, 2013 at 4:46 pm

no one knows what will actually happen. the leaders?? in government positions don’t really know, the citizens don’t really know; everyone is guessing. possibly a few get lucky and come out ahead of the game and attribute that to their knowledge base. all your writing and opinion is based on concepts and collectivist thinking that exists only in the domain of your selected position. try washing dishes for a busy restaurant and tell me it isn’t difficult. i did it when i was younger and it sucks. it’s the back bone of any restaurant and restaurants are a part of local and national economies. capitalism is a theory that may or may not be working as planned and may or may not ensure the survival of humans as a method of utilitarian approach to providing food, shelter and educational development to humans and their pets/children. we are all participants in an experiment called the united states that practices capitalism. there are no guaranteed or proven results or expectations. ideas about something, its’ appearance and direct experience in reality are all different things. those people that work at minimum wage jobs are and will always be needed in the current economic system. there are quite a lot of them out there and they are all dependent on the same system for survival. why can some employers find a way to pay their workers a living wage and not other employers when each process and system within a business is linked and interconnected? maybe a lift on the economic barriers preventing employers from paying people more is the real area to be examined. this way an across the board improvement could be made to working conditions and wages.


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