Minimum wage hikes to lead to higher unemployment, weaker economy in collapse

On New Year’s Day, some of the nation’s lowest-paid workers will receive a bigger paycheck when the minimum wage increases in 10 states. Approximately one million employees will see more income as part of state cost-of-living adjustments that account for inflation, a growing factor in the United States.

Although the federal minimum wage will remain at $7.25 per hour – the last one was in 2009 – the average increase will be about 10 or 15 cents. Washington State will remain the No. 1 state with the highest minimum wage when it jumps from $9.04 to $9.19 on Jan. 1, 2013.

There have been various local media outlets reporting on news stories across the country that have highlighted how happy some employees will be next week. For instance, local NBC News affiliate in Florida interviewed a 16-year-old who will be earning an additional 12 cents per hour. Naturally, he is thrilled with the news and noted that the extra $20 in his pocket will help in the long run, such as assisting in his post-secondary education endeavors, buying new rims for his truck and taking girls out.

The states imposing a higher minimum wage are Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Rhode Island, Vermont and Washington State.

Washington officials see the minimum wage increase as a good thing and will be the right thing to do for families, workers, businesses and the overall economy.

“It is long past time to establish a fair minimum wage in our country,” said Iowa Democratic Senator Tom Harkin, who introduced legislation this past summer to raise the minimum wage from $7.25 to $9.80 over the next two years.  “It is good for families, good for business and good for our economy, and, most importantly, it is the right thing to do. People who work hard for a living should not have to live in poverty.”

President Barack Obama pledged during the campaign to increase the minimum wage to $9.50 per hour and index it by the end of 2011.  However, there has been no mention of any wage hike by the president any time soon.

Many others see minimum wage hikes as a negative, especially in such a fragile economy when there is a paucity of economic growth, a decline in business start-ups, high unemployment levels, especially among those between 16 and 24, and growing public and private debt.

On a simplistic level, opponents of higher minimum wages argue that it hurts small businesses because it means they have to pay their employees even more and then eventually cut back on the hours due to the fact that the owners can’t afford to pay their workers. This comes at a time when many companies are scaling back because of Obamacare.

Another case that can be made is that an increase to the minimum wage can hurt the state’s competitiveness.

“Let’s just say we have two states that share a border and one state raises the cost of labor by raising the minimum wage. What will happen is businesses in the state that does not raise the minimum wage will now have an advantage,” said Brian Wesbury, chief economist at First Trust Advisors, in an interview with Fox News.  “They can sell their product for less because they have a lower cost of production.”

Many adherers to Austrian Economics make the case that anti-poverty measures, such as the minimum wage, actually hurt the poor and further the impoverished levels in any nation. Nobel laureate Milton Friedman called minimum wage as one of the worst “anti-negro laws” because it hurts them (at that time) from getting jobs in low-skilled positions – the same case can now be made with immigrants and youth.

Indeed, it hurts teenagers and those who have no skills at all from obtaining a position because a company is forced to pay its workers a certain wage which means it will find individuals that understand the job at hand without having to train them.

“The minimum wage law is most properly described as a law saying that employers must discriminate against workers who have low skills,” Friedman famously said in a television interview during the 1970s.

In other words, published by D.W. Mackenzie at the Ludwig von Mises Institute:

“The economic case against minimum wage laws is simple. Employers pay a wage no higher than the value of an additional hour’s work. Raising minimum wages forces employers to dismiss low productivity workers. This policy has the largest affect on those with the least education, job experience, and maturity. Consequently, we should expect minimum wage laws to affect teenagers and those with less education. Eliminating minimum wage laws would reduce unemployment and improve the efficiency of markets for low productivity labor.”

In the end, those who oppose minimum wage and the unintended consequences of said policies expect higher unemployment, more poverty, some businesses actually having to shut down because of labor costs and fewer opportunities for the nation’s youth.

Full list of states and their 2013 minimum wage levels:

– Arizona: $7.80

– Colorado: $7.78

– Florida: $7.79

– Missouri: $7.35

– Montana: $7.80

– Ohio: $7.85

– Oregon: $8.95

– Rhode Island: $7.75

– Vermont: $8.60

– Washington State: $9.19

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