I believe that the Democrats have made a grave decision by including the wrong-headed $15 minimum wage by including it as part of their platform. Many people regard this as a radical idea, but I regard this as an economically inefficient and completely nonsensical idea to boost poverty in the United States. Why are they wrong? Here's my take on the idea.
1. Minimum Wage of $15 Will Almost Never Boost Poverty: Wages are generally set by the market in every sector and this corresponds almost exactly to the goods and services that our consumers purchase from that company or that organization. The minimum wage was never intended to be anything but to maintain that the person to be working at the minimum rate to receive anything but a level barely above a subsistence level. Franklin Delano Roosevelt and the New Deal government at that time never meant it to be anything but such, rather than a "living wage". There is also the moral judgement of whether we should reward workers who might not contribute enough economically to warrant such a wage. Surely it will have negative consequences on the wages of other workers.
2. Minimum Wage of $15 in an era of globalization and will cause an increase in goods and services: Minimum wages will not work in an era of globalization. With factory jobs and other positions located elsewhere, there is good impetus for companies to outsource the positions if the prices are too high for them to be located in the current location. If it is a job you cannot outsource, it will just lead to inflation on goods and services which will be extremely detrimental to the customers and also on workers. It will not really increase the wages in that sector if it will cause goods and services to adjust accordingly.
3. Minimum Wage of $15 Will Lead to Further Unemployment: A majority of empirical studies, including this one conducted by the Congressional Budget Office, listed that it will indeed cost jobs. Let's use a generalized example here: What if a business that produces $20 dollars and by hiring two workers at the current federal minimum rate of $7.25 will help it to generate a profit of $5.50. What if that business can no longer make a profit by the new minimum wage laws? They will most likely have to adjust their business strategy by laying off or not hiring any workers. This especially applies to the young that are just starting out in the labor force and unskilled laborers. This will just put more people out of work and into taking more federal welfare money. The United States already has the population roughly the size of Spain on welfare and we don't need another Spain without making the federal budget deficit even worse.
4. Fight for Fifteen? How about a fight for 25 or 50: If they have a rationale for $15 a hour, why not $25 a hour or $50 a hour? Where are they getting their numbers from? If these qualified policymakers think that increasing the minimum wage will not cause any increases in how the other factors are calculated, then the opinion from economists do not matter!
I think it's better if both parties listened to economists and realized that increasing the minimum wage above the appropriate price ceilings, it will have a detrimental effect on the economy as a whole. It will lead to unemployment, inflation on good and services and worst of all, more outsourcing! There are many other ways of increasing the welfare and the livelihood of people rather than increasing the minimum wage, which is a detriment to how the labor markets function.
