Market forces can raise wages more effectively than legislation
Tuesday, June 22, 2004 7:24 AM PDT
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E-mail this articleDemocratic Presidential Candidate John Kerry of Massachusetts has called on raising the national minimum wage to $7 by 2007, and increase of $1.85 per hour over what it is now.
In one sense, his case is easy to support. Certainly any help the nation's working poor can get is good, isn't it?
But opponents make an even more compelling argument: Raise the minimum wage and some of those people who toil at the bottom of the pay scale will lose their jobs. It's simple economics. If the cost of doing business goes up, employers are going to reduce those costs so that they can maintain their profits and economic livelihood.
For those minimum-wage workers who lose their jobs, they will see their salaries go from $5.15 an hour to zero dollars an hour. It's easy to guess which option those workers would prefer.
The federal minimum wage will go up next year because both major presidential candidates favor it, although President Bush favors a smaller increase than Sen. Kerry does. The minimum wage was last increased in 1997.
Still, we think the better argument for lifting wages is not by changing federal law, but by reaching full employment. People who work at minimum wage do so because there are more people seeking those jobs than there are jobs. If the situation were reversed -- more jobs than qualified candidates -- wages would go up.
That's what's happening now in parts of the country where unemployment is below 3 percent, such as Fargo, N.D., Sioux Falls, S.D., and Omaha, Neb. No one, including high school students in their first jobs, in those communities works for minimum wage because their economies are so hot that the demand for workers, even unskilled ones, exceeds the supply.
The Dakotas and Nebraska can credit low taxes on businesses, relatively inexpensive college education and high quality of life in those communties for their success. The result is nearly full employment and no one working at minimum wage.
What we'd like to hear from Sen. Kerry is what he would do to achieve full employment in more parts of the country. His suggestion of raising the minimum wage, while inevitable, is not the answer that will spur the economy and drive up wages.
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