The calls are getting louder for a hike in the minimum age to $15 an hour. Most Democrats, including presidential candidates Hillary Clinton and Bernie Sanders support it, while most Republicans, and practically all business owners, oppose it.
The latter may look like the bad guys — after all, doesn’t everyone deserve a living wage — but the fact is that minimum-wage hikes are historically job-killers. The politically non-partisan Congressional Budget Office estimates that this proposed hike will kill 3 – 5 million jobs, while higher estimates reach 6 – 8 million. Most business owners would rather cut costs than raise prices, so $15-an-hour employees are a serious incentive to reduce their number, and hours, or, where possible, replace them with machines (have you noticed how many restaurants now use electronic “smart” tablets to take orders?).
Still, most Americans support a minimum wage because it’s only fair that we pay workers a decent living wage for their labor. But how many Americans would support it if they realized a federally mandated minimum wage is actually a form of welfare?
Think of it this way. A $15-an-hour wage is much more than would be paid if the law of supply-and-demand was determining wages — otherwise there would be no need to continually mandate minimum-wage increases. So what is the difference between a minimum wage that forces a business owner to pay his employees higher wages than he would if the free market was setting those wages, and increasing taxes on that business owner and giving that additional revenue to his employees? In both cases there is a forced transfer of wealth from the business owners to the employees, and a forced transfer of wealth is a welfare system’s operating principle.
And the beauty is that, while the term “welfare payment” has a negative connotation, “minimum wage” sounds like a justifiable economic principle. Even better, Democrats avoid the usual “tax and spend” label because no general taxes are levied by the government, nor does the government increase spending. Rather, the private-sector business owner increases spending because his money goes directly to the private-sector employee. It’s a win-win for Democrats because they’re on record as doing the right thing for blue-collar Americans — a significant Democratic voting bloc — while maintaining the cleverly disguised fiction that because it doesn’t cost the American taxpayer any money, Democrats are being fiscally responsible.
But it’s really a classic “sleight-of-hand.” Anytime you force a business to pay wages above what the market determines is rational and fair, you are, for all practical purposes, taxing the business owner in order to provide additional benefits — a form of welfare payment — to the employee. Then again, “sleight-of-hand” is one of the foundational principles of modern-day politics.
