The Truth about Minimum Wage
A federal minimum wage has been around since 1938; starting out as a way to set wage precedents for workers, minimum wage has grown and changed in accordance with growing inflation for the past 76 years. Although a federal minimum wage allows workers to have a minimum amount of income that is necessary to survive and pay the bills, and it forces businesses to share some of the vast wealth with the people who help produce it, federal minimum wage costs the economy thousands of jobs and makes little sense due to cost-of-living differences throughout the country.
People tend to believe a federal mandated minimum wage helps the poor, and counteracts poverty. Darius Ross, of the Rockland County Times, believes that “raising the minimum wage will put more money in the pockets of workers who most need to spend those dollars. It will boost consumer spending at local businesses across the state. And nothing drives business owners like me to hire additional workers more than increased consumer demand”. While Ross makes a good point that raising the minimum wage will add to the disposable income of certain people, he does not mention what this raise will actually do. Minimum wage sets a price floor. A price floor, simply stated, is a price limit placed on businesses telling them they cannot offer the good or service being sold below a certain price. A price floor creates shortages, and in the case of minimum wage, that shortage is jobs and the result is an increase in unemployment. Some economists argue federal minimum wage forces businesses to share some of the vast wealth with the people who help produce it. Businesses can exploit their workers by paying them “off the books” to avoid minimum wage, and taxes. Again this may be true that businesses can exploit workers by not paying taxes or benefiting themselves through unrecorded income, but freeing up this capital by abolishing a federal minimum wage allows the business to hire more workers, and in essence reduce unemployment.
Despite the security and comfort a minimum wage provides, the benefits to abolishing the federal minimum wage vastly outweigh the detriments. The clearest example of the inefficiency of a federal minimum wage is the cost-of-living differences in various states. Obviously a $7.25 an hour wage isn't enough to support a person who lives in New York, yet it may be enough to support people living in a rural area or even a small town. Real estate agents always say location is the most important part of buying a house. That is why a 1-bedroom apartment in Times Square may cost 5 times as much as a 5-bedroom apartment in a small town in western Pennsylvania. Housing is only a small part of calculating the cost of living for certain areas. Consider how much more gas costs for a commuter than it does for a small town worker who can walk to work. The list goes on. Therefore, a $7.25 minimum wage may be more reasonable in South Dakota or Washington, but it would be...