By John McClaughry
In Vermont Digger’s article on the $15 minimum wage bill about to pass the Senate, Gov. Phil Scott’s spokesperson Rebecca Kelley is quoted as saying that the governor “could support a minimum wage increase if the proposal included provisions to prevent adverse economic impacts of such a hike.” Great idea! Lay the higher minimum wage burden on small businesses, then contrive to have the taxpayers (who else? Mexico?) subsidize the small businesses for their losses. Brain dead doesn’t seem too harsh a verdict for this sort of thinking.
The hard fact is that when the government mandates a wage above the market wage, some people will see a bigger paycheck, but some other people will disappear from the labor force as businesses can’t afford to pay them that much. What about them? They are typically low-skilled young, minority, part-time workers. What are their opportunities to climb the income ladder, when the bottom legs of that ladder are closed off to them?
Most of the jobs paying at or near the minimum wage are created by small businesses, including agriculture. Forcing those businesses to pay more creates a strong temptation to relocate elsewhere, automate jobs, or go out of business. Where does that leave the young, low-skilled would-be worker? Out on the street, with all the temptations and vices that often brings.
There’s nothing new about this analysis. As I wrote in June 1993: “Increasing the Vermont minimum wage will simply demonstrate, once again, that the legislature is under the control of people with no knowledge of economics, plus liberals who believe that government should mandate higher incomes for their favored constituencies, plus plain cowards who hope that the victim of the minimum wage (largely unorganized and voiceless) will blame the loss of their jobs on something else. Raising the minimum wage is one more sure step toward destroying what little is left of Vermont’s economic competitiveness. Worse yet, it is a crime against the people who are supposed to be helped.”
John McClaughry is vice president of the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.