Raising the Minimum Wage Actually Makes Workers Poorer & Demonstrates the Risk America Runs in Allowing Private-Sector Freedom to Be Abolished
“The smallest minority on earth is the individual. Those who deny individual rights cannot claim to be defenders of minorities.” ―Ayn Rand
What Happens When the Government Gives Workers Raises?
When individual business owners are not free to run their own businesses, and the government can arbitrarily dictate their costs by giving workers an unearned pay raise, the first thing businesses have to do is to raise their prices to cover those higher costs. The result of the price increase is that there will be fewer takers for whatever product the business sells. Higher prices never increase sales among customers. Also, a higher price for labor means that fewer workers can be hired, since, likewise, a higher price for labor never works to increase hiring. In fact, in many businesses, the higher wage price will cause lay-offs. These are command-economy realities that cannot be wished away.
Businesses Can Only Exist If They Are Profitable
Businesses must run at a profit, the same way any private household must bring in more money than it spends. Also, in any given enterprise, the business owner is the last person to get paid (since, from a legal standpoint, workers, products, rent, utilities, and taxes must all be paid first). And the business owner is usually responsible for the financial well-being of family members as well as for his or her own well-being. We must never lose sight of the fact that businesses are comprised of individuals.
Fewer Customers Means Business Failures
Let us say that a certain area of town has ten restaurants, and there are enough customers to support them all, until the minimum wage increase arrives unbidden, and they all must raise their prices. Since higher prices work to bring fewer customers into these businesses—or will bring them in less frequently—sales decrease as a result. Fewer customers spread out over the same number of restaurants means that some restaurants, most likely, will have to close their doors. Thus, by mandating price controls on wages, the government has financially discriminated against, and indeed targeted, the free market, private employers, enterprising families, and free individuals.
Less Competition Puts Upward Pressure on Prices
Fewer restaurants also means less competition on quality and on price, and prices tend to go up more, in a less competitive environment, than they would go up if every business had been able to remain open. The more competition there is in a marketplace, the higher the quality of the goods and the lower the prices. Remember, if you have too much greed in a free market you will be punished by consumers, who will patronize your less expensive competitors. But, once competitors begin to disappear, due to government interference, prices begin to rise beyond what is needed to cover costs and make a profit.
An Aside About Price Controls & Healthcare
We are now seeing the tragic results of forcing price controls on the healthcare market. Due to rising prices that have come about, and due to the anti-competitive price-control policies of the government, it has become increasingly difficult for consumers to afford care, yet people are criminalized if they cannot afford to pay the high prices and, therefore, do not purchase care. The proper way to increase quality and reduce prices in the healthcare market is to use market forces. Any government entitlement in healthcare should give the people money—or vouchers—to buy healthcare on the competitive, nationwide free market. Price controls will always decrease competition, bringing higher costs, lower quality, and the rationing of care, which will, in turn, result in more misery, including death, as a byproduct.)
The Higher Minimum Wage Effectively Harms the Individual
The individual wage earner’s government-mandated increased wage forces higher prices for goods and services in the marketplace, which effectively cancels any benefit to the wage hike that was given. And some workers, as a part of the new cost-cutting needed for businesses to stay afloat, will lose their jobs.
Tax Increases to Cover the Increase in Unemployment
The higher unemployment that results from business closings means tax increases will become necessary, in order to pay the higher burden of support via unemployment insurance. This will now introduce a new financial burden to businesses beyond the wage increases already mandated. Again, their prices will be forced up, there will be more firings, more business closings, and ultimately more increases in government spending to cover the expense of offering government relief to those who are new to the ranks of the unemployed. This government-caused vicious cycle will continue, ad nauseam, until someone calls a halt to it, possibly by instituting tax cuts for businesses to re-institute hiring and business expansion, followed by a moratorium on the raising of worker pay by government fiat.
What Government Gets Out of a Minimum Wage Hike
What the government gets out of a minimum wage increase is more dependency among voters for relief programs. These voters, in the future, will feel more loyal to the government and will typically vote for politicians who offer to expand such programs. Even pay raises, after all, come from the government and not their employers. And if, perchance, your job is lost, it is the government who supports you—your prospects of finding a new job in the government-imposed economic contraction being slim to none.
Politicians can then purchase votes by promising free relief money, free food, free college, or what-have-you. But the truth is that, in actuality, nothing is really free. An ever-widening chasm between rich and poor results from the government’s disabling of the free market in wages and, as a result, the pricing system for goods and services that are impacted greatly by externally-imposed wage hikes. Upward mobility slows, and then regresses, widening the income disparity between rich and poor.
A Free Market Economy Is the Best Redistributor of Wealth
In a free market, the economy is free to expand. Every business owner is free to offer the wages he or she wishes. If no one takes a job being offered, the wages being offered are likely too low. Too many applicants would, likewise, signal that the wages offered are too high. Workers are free to turn down jobs whose pay they think is not enough, for whatever reason; and they are also free to take jobs from competitors who are offering more money for the same job. Businesses must, then, be conscientious about offering pay raises to retain their best employees. In an expanding economy, these are much more affordable.
In an expanding economy, job applicants often find themselves in the position of being extended multiple job offers. People feel less stressed and more free in such an environment. There is more upward mobility, and it happens faster. But the more powerful the government is permitted to become, the more regulated, more cost-burdened, and less free becomes the marketplace, since it is in the nature of government employees to manufacture rules and regulations that take time and money for businesses to discover and follow. All of this takes a human toll in increased human misery and more government dependency. Every ethnicity and every level of disability is affected. The decrease in people’s financial well-being and the time requirements necessary to mount a legal defense of their rights, as they work longer and harder to provide for their families, can only mean the endangerment of those rights, since there will be a decrease in the number of people who, given their more impoverished situations, are willing to spend time or money to defend their rights and freedoms.
The Infantilization of the People & Its Impact on Their Rights
The more a parental government begins to care for its citizens, cradle to grave, the more those citizens lose their independence, both in terms of personal finances and individual rights. After all, a parent does not award children rights, but privileges. Rather than the government serving its citizens and seeing its role as safeguarding their rights, citizens begin to serve the government, vying for privileges that others do not have, and citizens become divided against one another. Rights are converted into privileges at every level. And when individual rights are endangered by the growth of big government, every group suffers from the atmosphere of scarcity and divisiveness in the citizenry.
As Ayn Rand so wisely put it, “The smallest minority on earth is the individual. Those who deny individual rights cannot claim to be defenders of minorities.” And it is also true that those who would convert those rights into government-sponsored privileges and entitlements—such as government-forced minimum wage hikes—condemn us all, in the end, to government-enforced indentured servitude, where nobody has rights anymore.
Indeed, the minimum wage laws are merely a symptom of a much deeper problem, but it is a problem which must be addressed soon, lest we all become thralls of the state.
The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by EagleRising.com