Vermont Senate committee has given the go ahead to the legislation to increase the state minimum wage to $15 an hour over a 6-year period. Many believe this will help cut the wage differences between the rich and poor, while giving the poor a chance to save money and help their families. This method is questionable, because as has been seen in the market if the cost of production, material, or labor rise, so wont the price. Many small companies won’t be able to afford the extra payout, on top of the high cost of benefits. With wage increases comes many more problems than solutions, short term it my provide quick statistical boost to economy, but in the long run it will hurt the market and will crush small business and low skilled labor. Many studies have shown that a wage increase is not a long term fix, but rather a short term band aid.
“This is one concrete thing we can do to help people at the lower end of the wage scale,” said Sirotkin. “And the benefit to the economy is that when you give folks who are making presently $10.50 an added 50 or 60 cents an hour, that money will get plowed back into the economy.” Stated Sen. Michael Sirotkin, the chairman of Senate Committee on Economic Development, Housing and General Affairs. Even though short term this would help boost the economy there is overwhelming evidence that suggests increasing the minimum wage would do little to reduce poverty or inequality. It would almost be certain to reduce employment opportunities for the young and the low skilled. As stated by our own congressional budget office “raising the wage would increase family income for many low wage workers. But some jobs would probably be eliminated and the income of those workers would fall substantially.”
Is raising the wage worth losing your job? Cutting your hours to make up the difference? Losing benefits or the work itself? To me having a job with a steady source of income is worth more than standing in an unemployment line.
“One of the studies from the University of Washington shows that workers got less hours because of this and therefore ended up making less money,” said Soucy. “Vermont is so dependent on the small businesses. Most of them that testified could not pay the $15-an-hour minimum wage.” In a recent case study that controls for confounding factors that make it difficult to isolate the impact of an increase in the minimum wage on employment for low-skilled workers, Joseph Sabia, Richard Burkhauser, and Benjamin Hansen find that when New York State increased the minimum wage from $5.15 to $6.75 per hour, in 2004-06, there was a “20.2 to 21.8 percent reduction in the employment of younger less-educated individuals.”
The best anti-poverty program is not the minimum wage but economic freedom that expands workers’ choices and allows entrepreneurs to freely hire labor without the government dictating the terms of the exchange, except to prevent fraud and violence. When entrepreneurs adopt new technology and make capital investments autonomously — that is, without being induced to do so because of government mandated increases in wage rates — there is a boost in worker productivity, jobs, and incomes. But when the government increases the minimum wage above the prevailing market wage for low-skilled workers, firms will have an incentive to substitute labor-saving production techniques that destroy jobs for low-productivity workers, especially minorities, and prevent workers from moving up the income ladder (the minimum wage delusion, James Dorn, cato.org).
There may not be a simple fix or a quick fix, but shoving money into a hole won’t fix it. The wages have been stagnant since the 70’s where wages have not been keeping up with inflation. We need to look at the inflation and wages and try to equal them out. Raising wages to meet today’s market will drive up inflation and costs will get out of control and we will be back to the same problem in a couple years. If the senate is really worried about the people and the wage gap, cut our taxes and let people keep and spend what they earn. Raising wages will also give more to the state and government without them raising taxes. I’m not sure that state has anyone’s interest at heart, but for theirs.