The recent attempt to raise the federal minimum wage from $5.15/hr to $7.25/hr has failed, at least for now and I for one will be a happy person today because of it.

The only part of the ruling that really ticks me off is the way it’s being reported.

Even the local news prefaces the vote with crap about “families” and “single mom’s with 4 kids” to get your sympathy prior to actual news on the ruling. Even Oprah is getting in on the gig, and devoting a show to “what it’s like to raise a family on the minimum wage”. Sorry Oprah your segment should be renamed to “what it’s like to be a moron for giving birth to children when you either can’t or won’t get a job that pays more than $5 an hour.”

It IS true that you cannot raise a family on the minimum wage, but it is ALSO true that the minimum wage was NOT intended to be a living wage like so many politicians and talking heads pretend it to be.

Changes in the minimum wage has a VERY large affect on workers, more specifically workers in the 16-24 age bracket (more than HALF of Americans earning a minimum wage). David Neumark, professor of economics at Michigan State University, and William Wascher, a researcher with the Federal Reserve, found that minimum wage hikes decrease the proportion of teenagers enrolled in school. (( David Neumark and William Wascher, “Minimum Wages and Skill Acquisition: Another Look at Schooling Effects,” Economics of Education Review 22:1-10.)) Raising the minimum wage, increases the income of lower skilled workers, namely high school/early college students, which entices them to work more and results in a drop in school enrollment that just ends up increasing to the growing numbers of uneducated lower skilled workers in our country.

Workers are rewarded with higher paying jobs based on their skill level and education. This is a fact that is conveniently ignored when minimum wage discussion ensue during any election cycle. A company is simply NOT going to pay you $50,000 a year if you have a GED and little to no skill in the area. This is a FACT, and not a reason to demand that government step in and reward you for nothing. If you’re expecting $50,000 a year, you’d better have the skills and the education to back up or you’re just living a pipe dream.

There are also studies that show that the “point” that increasing the minimum wage reduces poverty is simply not true. (( David Neumark and William Wascher, “Do Minimum Wages Fight Poverty?,” Economic Inquiry, 2002, v40(3,Jul), pp. 315-333.))

On balance, we find no compelling evidence supporting the view that minimum wages help in the fight against poverty. Rather, because not only the wage gains but also the dis-employment effects of minimum wage increases are concentrated among low-income families, the various trade offs created by minimum wage increases more closely resemble income redistribution among low-income families than income redistribution from high- to low-income families.

Our governments roles and responsibilities are spelled out for them in the Constitution, yet nowhere do I see a clause or a specification that demands the government step in on a private contract and demand wages. From the business perspective, when you are hired to work for a company you are entering in on a private contract to perform duties for said company in exchange for money proportionally related to your skills, education and performance. The better your skills, education and performance are the more valuable you become to your employer. The way the government sees this relationship is as an exploitative relationship in which employers obtain a workforce and without government intervention, said employer would never voluntarily increase wages unless they were forced to. If the intended goal behind this coercion is to make every-one’s life happy and fun, why just $5 an hour… wouldn’t a $25 an hour forced wage make everyone happy? Why not $100 an hour… $150, or even $500/hr? I know I would be jumping for joy if my hourly wage jumped $30 an hour overnight.

Economist Henry Hazlitt put it better than anyone I’ve heard recently:

You cannot make a man worth a given amount by making it illegal for anyone to offer him less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment. You do harm all around, with no comparable compensation. (( Heny Hazlitt, Economics in One Lesson (New York: Arlington House Publishers, 1979), p. 135.)) The net loss to society that results from this sweeping act of “wrongful discharge” is staggering. Those losses include: 1) The loss of employment to the individual himself, 2) the shrinking of the economic pie by the loss of his productive contribution, 3) the financial loss to society in supporting him in his idleness (unemployment compensation, welfare, etc.), 4) the financial loss in funding useless job training programs and other government efforts to get him re-employed, and 5) the net loss to society in having consumer prices driven up to cover the higher labor costs, and the loss of market share to foreign competition that may occur.

If I was willing to scrub dishes in a seedy bar in North Tulsa for $2 an hour… is it the job of the government to step in and say I cannot do so?

The intentions behind a minimum wage are good, but the results are far too often MUCH worse than expected. (boy that could pretty much sum up government in general I guess)