In President Obama's 2013 State of The Union address, he promoted raising the federally mandated minimum wage so that "no one would live in poverty" and "for businesses it would mean customers with more money in their pockets." Now, multiple states are trying to pass laws raising the minimum wage to $10 an hour, and Obama just signed the increase for Federal employees into law.
Doing the math shows that Obama's promise falls short. At $10/hour, a full-time worker earns $20,870 annually. But the stark reality is the median income of someone with only a high school diploma in the United States is $31,539. "Wait!" exclaims the critic, "Not everyone is afforded the opportunity for a high school diploma. What about the less fortunate?" Answer: The median income in the United States for someone who never finished high school is $25,039, 17 percent higher than that glorious proposed minimum wage standard. These objective statistics support that if people are truly determined to work, they find a job (or two) and provide for themselves and their families.
Minimum wage is a device used to keep financially and demographically minority families trapped in a cycle of dependence on the government. Many of the constituents of politicians supporting this legislation are people educated in a system that never challenged them. They look to the government as the source for income equality and career opportunity when candidly, the real problem is not the wage: it's cultural, educational and political. For people who only earn minimum wage, the government subsidizes school, housing, food, transportation, and even cellphones; what incentive do these citizens have to climb out of poverty when government provides the delta between their income and a living wage?
It's not the government's job to provide income parity or job security. While perhaps it would be different under a Communist state, the U.S. is a constitutional republic, and the opportunity afforded every man and woman is constitutionally designed as equal. The dream for citizens of the United States is the same as when immigrants passed through the gates of Ellis Island: work hard, persevere and secure an income and lifestyle far above the circumstances of most of the world. Beyond that, the American dream says that some will have success beyond their imaginations. Of course, some are born into wealth. But the stark truth is that 90 percent of Americans - including seven of the last nine U.S. presidents and seven out of 10 CEOs of the top 10 Fortune 500 companies - were born to lower or middle-class families.
Today, some in Washington jeopardize that dream with false promises; they pretend that establishing a minimum wage above a market-based pay scale is a positive construct when, in fact, it's a compounded negative. On the one hand, it falsely entraps many in a wage that is not truly livable while simultaneously forcing the price of goods and services higher than the market can command. It begs the question, if $10 an hour is of benefit, why not $15? If $15 is good, why not $25?
When the U.S. economy - a mostly free market with some government meddling - accommodates an inflated minimum wage, "Economics 101" dictates that it forces businesses to increase prices, causes fewer products to be sold, and creates a disconnect between people willing to the job at a lower price and their prospective employers. One of the most devastating effects is levied on the minimum earners as jobs are relocated to environments where the wage discrepancy does not exist. In short, the off-shoring of jobs is not a new phenomena and is exasperated whenever the minimum wage is artificially inflated.
In addition to the direct effect on the minimum wage earners, the most significant financial burden falls on the middle class. Often, minimum wage earners work in unskilled or entry-level jobs. These are the burger flippers, convenience store cashiers, and pizza delivery guys. As a result, this wage increase will indubitably inflate the costs of goods and services that matter to the middle class like a gallon of gas, a pizza, a blender, childcare, a haircut, or a pair of shoes.
The Economic Policy Institute (a liberal think tank) says that raising the minimum wage would generate more than $30 billion. What they forget to mention is that jobs will be stolen from the lowest earners, and the money is going to come from middle-class Americans in what is nothing more than perhaps the biggest Ponzi scheme of all time.
Nathan Fisk is a business consultant and Partner at Fisk Real Estate Group in Colorado Springs. Contact the author at email@example.com.