Economic illiteracy is the problem with minimum wage proponents

It’s quite understandable that many public officials, union leaders and anti-poverty activists are illiterate when it comes to economics. However, a paucity of elementary understanding can lead to long-term consequences and ramifications for the people these leaders intend to help.

This can be applied to minimum wage laws and proposed hikes. (I assure you this will be brief.)

Since President Obama’s State of the Union address, the topic of an increase in the minimum wage has been dominated on television talk shows, op-ed pieces and debates on radio programs. The left usually purports that the minimum wage will help the poor and give them a better standard of living, while the right will say it’ll hurt jobs.

Although the right is correct when they say any hike in the minimum wage will hurt small businesses – the Congressional Budget Office (CBO) confirmed this – they tend to ignore the fact that most proposals lack economic basics.

For instance, many want the government-mandated wage rate to be $10.10, while others want $15 per hour. Where do these numbers come from? Are they based on any economic model? Economic reasoning? What about regression analysis? It seems these numbers are just created out of thin air by politicians, unions and anti-poverty organizations without any economic logic.

How do they understand that the minimum wage needs to be $10.10? Why shouldn’t it be $9.99, $10.05, $10.15 or $4.20 per hour? When it comes to wage rates, there is only one determining factor: the marketplace. Once the market suggests what the hourly wage should be for workers it is then up to the employer and employee to agree upon a set wage.

“There ought to be an increase in the minimum wage,” Arkansas Democratic Senator Mark Warner said in an interview with Bloomberg News. “I think there’s a valid debate about amount and timing.”

That’s it? Timing and amount? What about economics and data? Why aren’t these going to be debated and discussed?

Over in the province of Ontario, meanwhile, Premier Kathleen Wynne wants to tie the minimum wage to the consumer price index (CPI), while New Democratic Party leader Andrea Horwath thinks the minimum wage should be set at $12 by the year 2016. Where do these numbers originate?

“We need a balanced approach where families get a raise while ensuring small businesses grow and thrive to create more jobs,” the NDP’s small business critic Wayne Gates said in the legislature.

Again, why $12? Why not $15? $20? $50? Proponents of the minimum wage really need to start explaining where they get their figures from and why a minimum wage should be set at a suggested amount.

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