Why the Federal Minimum Wage is such a stupid idea

Question. A boat is floating in 24 feet of water. A ladder off the side of the rope has water up to the fourth rung from the top, and the rungs are exactly 9 inches apart. If the water rises at 1 foot an hour, how long until the water reaches the third rung from the top.

Before you grab a pencil and paper and try to figure it out, it's a trick question. The boat rises with the water, so the water level on the ladder hung from the boat will always be exactly the same no matter how much higher it gets.

Question. If the purchasing power of the poorest people in the nation is currently at $5,000 per year in 1980 dollars, by raising the minimum wage 70 cents a year how long until their purchasing power is increased to $6,000 in 1980 dollars?

Wait, put down that pencil and paper. This is the same trick question. Our economy adjusts to supply, demanding and most importantly, purchasing power. The more money people have to buy things, the more expensive things get. Also, the more money employers are forced to pay their employees, the more expensive those goods and services that employers provides, will be to the rest of us.

Raising the minimum wage is nothing more than political snake oil. It makes some politicians look good, but hurts business, raises prices, reduces the number of minimum wage jobs and does nothing to improve those who slick politicians are pretending to help.

Proponents of the Minimum wage/snake oil scam claim that raising the minimum wage helps poor families. Dab that tear, then let's look beyond the scam.

The Heritage Foundation reports that 53% of minimum wage employees are teenagers or young adults under the age of 23. The other 47% have an average family income of $38,100 per year.

Less than 21 percent of minimum wage workers are the sole breadwinners of their families and less than 5 percent are sole breadwinners that work full-time year-round.

The average family income for all minimum wage workers is $45,200 and their wages account for 35 percent of their total family income.

The US Department of Health and Human Services places the 2007 poverty line for a family of four (close to the average family size) at $20,650. So how exactly are these poor families when they make well above the poverty line?

As John Cox said, "Raising the Federal minimum wage is one of those ideas that sounds good on paper, but is in fact very destructive, and could cripple our economy by forcing wages upward and creating higher prices for nearly everything we buy."

Several decades ago Japan was rocked with an epidemic of a condition known as Subacute Myelo-Optico-Neuropathy (SMON). Two drugs had been quickly developed when the condition first surfaced, Emaform and Entero-vioform, both brand names for a drug known as clioquinol. But the epidemic raged on. By 1966 over 2,000 people were suffering from the painful and as yet incurable stomach malady. It took the government of Japan almost two decades, untold millions of dollars and intense research by numerous health experts to finally conclude that SMON was caused by...clioquinol the very medicine they had been prescribing patients who were suspected of being in danger of the disease. The source of the disease was the supposed cure.*

Raising the minimum wage hurts America's poor by focusing the government's efforts in the wrong place as well as crippling those who are best suited to helping the poor, small businesses looking for employees. Making it harder to hire people is not the way to ensure people get jobs. It is, however, an easy way to get votes from people too naive to understand the real economic impact of an artificially inflated minimum wage.

Posted by Danny Carlton at May 12, 2008 8:13 AM