COMMENTARY: New Mexico, as well as many other states, constantly have state legislation put forth to increase the minimum wage. Every legislative session in the Roundhouse they put out multiple pre-files for bills increasing the state’s minimum wage. Is an increase in minimum wage really a good thing?
I understand the idea behind minimum wage increases – give the lowest-paid workers more income, putting them into a better situation, less people needing government assistance, and more individuals being self sustainable. The problem is that it doesn’t actually do those things.
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Stephen Despin
Will it give individuals higher paychecks? Yes, but will it give them more personal income and greater purchase power? No.
When a company, big or small, has to pay higher wages mandated by government without the profit margins to do so, two things happen.
One, they lay off employees who don’t bring enough value to pay the higher wages. This means that individuals who were previously employed and able to bring in an income are no longer able to and are now unemployed. There’s been correlation between higher minimum wage and higher unemployment in states that have increased their minimum wage.
Two, it increases the cost of production, which means prices increase along with the minimum wage, effectively making the increase obsolete for those it was meant to help the most.
When these things happen, we have an increase in unemployment, which leads to more individuals on government assistance rather than less, which increases the burden on taxpayers, including those whose pay just increased, meaning more money taken out of their now-higher paychecks. When the cost of living and cost of products increase along with it, they’re paying more for products they need and more for bills. This means they have higher checks but are paying more for everything, not making their money go any further than it did previously and meaning they have the same or less disposable income. It actually does more harm than the good it’s meant to provide. Who gets harmed?
Those who currently make above the current minimum wage are the ones who get harmed the most. If you currently make $12/hour and the minimum wage is $8.75, you currently make $3.25/hour above the minimum wage. If they raise the minimum wage to $12/hour they will not compensate the difference. Many companies simply can’t afford to do so. Whereas previously you had a little more disposable income, you now make minimum wage with higher prices and it puts you in a worse situation than you were in, again leading to more people on unemployment.
Higher minimum wage also leads to automation and the elimination of entry-level jobs. I’m sure we’ve all noticed that companies like Walmart are remodeling their stores to add more self checkout and cutting many cashiers. We’ve seen this also happening at companies like McDonald’s, which is moving to self serve kiosks. This is to cut down on production costs related to higher minimum wage.
Minimum wage jobs were never meant to be a career or living salary. They were meant for entry-level employees and high school students to get their foot in the door in the working world. It was for them to gain skills, experience and knowledge to move on to better, higher-paying careers. It was meant to be the first rung on the ladder toward working to build your career, whether that was going to college, learning a trade or getting education through certification courses to build a career that pays a livable wage.
With minimum wage increases and companies like Walmart and McDonald’s going to self service we’re eliminating these entry-level jobs. We’re making it harder for young people to make an income while gaining experience, knowledge and skills to move forward into thriving careers making a good income.
These are some of the many shortcomings with minimum wage increases. They do more harm than good and don’t help those they’re meant to help in the first place. They drag more people down than they lift up, and that’s a bad thing. If we want to truly lift people up we need to focus on educating individuals, economic growth and improving the economy, thus increasing prosperity. We need to start focusing on teaching people to fish rather than simply giving them the fish. Minimum wage increases don’t do those things; education, marketability and skills do.
Stephen Despin is an entrepreneur, political activist and grassroots mobilizer living in Albuquerque. He believes in working toward building the framework for a free and open society and the power of community-driven solutions. Agree with his opinion? Disagree? NMPolitics.net welcomes your views. Learn about submitting your own commentary here.