Tuesday, August 22, 2006

Raising the Wage, Raising the Exclusion Level

The LA Times reported today that California will raise its minimum wage. In otherwords we in California will raise the bar, excluding a larger group of people from obtaining work legally. We are in fact excluding more Americans from their ability to participate in free enterprise.

The LA Times said:
SACRAMENTO — More than 1 million Californians who earn the minimum wage will get a nearly 20% pay increase over the next year and a half, thanks to an agreement announced Monday between Gov. Arnold Schwarzenegger and Democratic leaders in the Legislature.

The hike, the first since early 2004, will lift the state minimum wage to $8 an hour from $6.75. Workers will get a 75-cent increase Jan. 1 and an additional 50 cents on Jan. 1, 2008.
This means that in January 2008, anyone not worth $8 an hour will forfet their job. When I was a kid I was at a lower skill level than I am now. I wasn't worth the minimum wage, so I had to work as an independent contractor to get work. Nobody would hire me. Once I had a couple years experience I was making well over the minimum wage. However, if I had just waited until the State of California allowed me to work as an employee of someone then I would have been without work for much longer.

Roger Koopman quotes Henry Hazlitt in an article entitled The Minimum WageGood Intentions, Bad Results published by Foundation for Economic Education.
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.
By raising the minimum wage we are creating a lose - lose situation.

  1. Raise costs for companies to operate.
  2. Force companies out of business because unskilled labor is too expensive for them to operate.
  3. Put more less skilled workers out of work.
  4. Cause spending to go down because more people are out of work because they aren't worth the minimum wage anymore. Since these people don't have jobs they also don't have money and so they aren't participating in the economy.
  5. More people will go on government welfare because they aren't worth $8 an hour. These people may have had a job before but now they are going to be laid off because of the financial hardship of the companies for which they work.
Think about the implications of these things.

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