The Minimum Wage Hoax

The House leadership is considering bringing legislation increasing the federal minimum wage to the House floor this year, either as a stand-alone bill or as part of other legislation. It's a TERRIBLE idea.

The fact is, the federal minimum wage is anti-capitalist, since it prevents an employer and a potential employee from engaging in free-market labor negotiations. For example, an employer may want to pay an entry-level employee $5.00-an-hour, and a potential employee may want to agree to that wage (because it may be better than having no job at all), but the federal government does not allow it. This federal intervention in private markets harms employers and workers.

Proponents of a higher minimum wage argue that raising the minimum wage will not affect employment. But in reality, quickly-increased labor costs unrelated to business conditions will encourage or force employers to fire employees, reduce working hours for existing employees, and/or postpone plans to hire additional employees. Again, this harms employers and workers.

The federal minimum wage, by setting artificially high wages, prevents many people from getting their foot on the first rung of the economic ladder and from getting on-the-job training critical to socio-economic advancement. Thus, ironically, the federal minimum wage could delay -- not accelerate, as critics on the left assert -- the realization of the American Dream for entry-level workers.

The good news is that the market has pushed wages upward. Each year, fewer workers earn the federal minimum wage. In 1981, according to the Congressional Research Service, over 15% of hourly paid workers earned the federal minimum wage; while in 2005, only 2.5% of hourly paid workers earned the federal minimum wage. Of those who do earn the federal minimum wage, according to the Coalition for Job Opportunities, more than 65% receive a raise within one year, and the median raise is 14% -- nearly three times that of all other employees.

We need to remind Congress of these economic FACTS -- *before* they make a terrible mistake when they return.