Economics 101: Raising Minimum Wage Doesn't Help Anyone

President Obama, in addition to his latest call for spending more money we don't have, is calling for raising the federal minimum wage to $9 an hour. This of course sounds like a great way to lift up the poor amongst us. Except...

...except raising minimum wage causes employers to cut back on employees and have less people do the same amount of work. Because, as I've said so many times,  business owners don't just bend over, grab the ankles, and take the hit. EVER. It's simply not what happens.

Historically, this is precisely what happens every time minimum wage goes up.

There is also a second factor, one that pundits who wear bow ties do not mention on the news: A lot of the products that set the pace of inflation are sold at establishments whose staff make minimum wage.  The average grocery store employee and the average gas station attendant, for example, make minimum wage. (I'm not talking about department or store managers mind you. Just the average attendant at the gas station and the guy who stocks the shelves at the store.)

Food and gas prices more than anything else set the rate of inflation, because if it costs more to staff the grocery store, guess what? That gallon of milk and box of Frosted Flakes will go up. It's guaranteed. In fact a minimum wage paycheck at $5 an hour bought the same things as a minimum wage paycheck at $6 an hour. The net effect of that wage increase was only seen on paper. Otherwise it was worth nothing.

No matter how many times liberals expect business owners to bend over and grab the ankles when they raise taxes or minimum wage or whatever, what always happens is businesses adjust the prices of their products/services in order to maintain their profit margins. It is a fact of life.  In a free market there is no way to force these business owners to stop raising prices to cover their recent cut in profit.

Not only that, but cuts in minimum wage take away from those employees at minimum wage jobs that have put in their time, worked hard, and earned raises. I've seen it from both the employee end and the management side.

When I was in high school and college I worked at a national fast food chain. I worked hard and received raises every six months like clockwork. By the time I had been there for two years, I was making nearly a dollar an hour over minimum wage. Then some politician decided it was a good idea to raise minimum wage.  Just like that, I was making the same money as the new person they just hired.

Now I can hear you Neighborhood Liberals saying "Why didn't your employer bump you up to $1 an hour over minimum wage?"  My friends, despite whether or not I deserved it (I did) and whether or not my immediate supervisors fought to get me a proportional increase (they did) they were unsuccessful because the company could not afford to give everyone who was making above minimum wage a proportional raise to accommodate. As it was, they had to raise prices just to cover the new cost of business.

Years later as a manager for the same company, some politician decided to raise minimum wage. I had employees who had worked for that particular restaurant for years. Their wage increase was about to disappear because of the new law. Oh, and just like I said above, the cost of basic products like a gallon of milk and a tube of toothpaste were about to go up as a result of this minimum wage hike, so the new minimum wage would have the same spending power as the old minimum wage.

I was able to fight for a handful of those employees to at least make A LITTLE over the minimum wage.  If memory serves me it was $.25 an hour over minimum wage, but some of these people were earning anywhere from $.50 an hour to $1 an hour over minimum wage. In reality, those people saw their wages GO DOWN in terms of what they could afford to buy. They had less buying ability than they had before, because some politician decided to raise minimum wage. In terms of real world purchasing, these hard working employees saw their wage go down.

This is the real economic impact of raising the minimum wage, friends. It's not people making more money, at least in terms of real purchasing power. It's a bigger (or the same) digit in the paycheck worth the same or less as it was before.  In the Real World economy, it doesn't amount to jack squat.