Let’s talk about the $15 minimum wage. This is another policy that is full of good intentions. We hear a lot about living wages and greedy Corporations when this comes up. I’m not against bashing huge companies if they operate unfairly in the market place, but let’s try to think about some of the side effects that we don’t normally hear when it comes to hiking up the minimum wage.
I’ll start off with saying that increasing the minimum wage is supposed to help a certain group of people. The low skilled employees in the workplace who are living pay check to pay check because they are getting paid minimum wage. Increasing it will actually have the opposite effect. It will harm those workers and place many of them out of work. It, in fact, makes it illegal for them to have a job. Let’s break this down.
If companies suddenly have to abide by a $15 minimum wage they will have a few options:
1. Pay their employees $15
2. Fire some of their employees to make up the difference of number 1
3. Raise prices of their goods and services to make up the difference of number 1
Odds are we won’t see many of number 1 without also seeing numbers 2 and 3. If the cost of goods and services increases as a result of this policy (which they will) then the net outcome is the same situation we have now. At first it may seem nice to get a raise to $15 but eventually prices will catch up and your purchasing power will decrease back to the level it was at before. That’s all money is: purchasing power. The amount of goods and services you can purchase with a certain amount of currency units (dollars).
Some people will get fired because of this, and that would be a shame. This would price them out of a job. It makes it illegal for them to be hired by a company that would have hired them at 5, 7, 10 dollars an hour. If the employee is only providing $12/hour of value to the company, why would the company pay the employee $15/hour? They would be operating at a loss and pretty soon there would be no company, and no jobs provided by that company.
Wealth and income Inequality are some huge issues we currently face. I am in no way saying all is well and nothing needs to be done. Raising the minimum wage is not the answer. It is the answer for politicians who want to get elected. But the root of this problem lies much deeper than just, how much are people getting paid? The root of the problem lies with our money and monetary system. Ever since the Federal Reserve (Central Bank) was born, the dollar has lost 96% of its purchasing power. Do you still think raising the minimum wage will solve this? Doing so is simply kicking the can down the road. If we truly wish to fight wealth inequality we must be resisting Central Planning, the Federal Reserve, and fiat currency. We must reestablish sound money and sound banking if we desire to see everyday people have a higher standard of living. I will certainly be writing about these topics in the future.