Minimum Wage: Analysis of Why Government Regulated Wages Do Not Work

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Our website has already explained the ideas behind the conservative and libertarian viewpoint on the minimum wage. Our original minimum wage article covers the philosophy of individualism and why a free market will end up with higher employment rates as well as wages in the long run. However, it is always important to go into more depth and explain with numbers and historical events.

The minimum wage hike in Seattle, which is raising the minimum wage to $15 per hour, has had both positive and negative effects. According to conservatives and libertarians, the minimum wage does more harm than good. It should be done away with entirely or largely cut back to promote the free market.

The Minimum Wage Ordinance went into effect on April 1st, 2015. The lawmakers set the ordinance to slowly raise the minimum wage to $15.00 per hour; assuming that the slow change would lessen the damaging aspects of the law and give business owners more preparation time. The final stage of $15.00 will begin on January 1st, 2017 for larger businesses and 2021 for smaller ones.

According to the Minimum Wage Ordinance – Fact Sheets accessible on the city website, “The minimum wage will increase every year on January 1 and eventually rise to $15.00/hour.” There are also different standards for size of business. Small employers, defined by Seattle as having, “500 or fewer employees,” or large employers, “501+ employees,” are given separate brackets for pay and benefits.

If a large employer pays towards medical benefits for their employees, the minimum wage is $12.50/hour. If not, they pay $13.00/hour. For small employers, the employees obtaining medical coverage receive $10.50/hour and employees without medical coverage get $12.00/hour.

Medical coverage according to Seattle is a plan, “silver-level or higher as defined by the federal Affordable Care Act. An employer cannot pay a reduced minimum wage if the employee declines medical benefits or is not eligible for medical benefits.”

Now that the ground rules for the wage plan have been laid out, we can analyze what has actually happened to the city. According to the Bloomberg View’s article on the matter, “The best guess is that workers who remained employed saw a quarterly increase in earnings of $184.” Since it is impossible to isolate the effects of the minimum wage from the rest of the economy’s constant changing, we can only get a rough figure.

The number is lower than expected due to less working hours. In order to compensate for the higher price of employing people, companies downsized their entire platforms, fired workers, or simply made them part-time jobs. This adds up to an additional $736 per year for the average worker. It should also be kept in mind that the amount will increase as the system goes through its phases.

However, the unemployment rate has risen. The amount of workers actually receiving the benefits of the pay raise is smaller than the original number of employees. The unemployment rate has climbed by 1.2% in the city so far. On top of this, 3% of the original workforce had to find jobs outside the city itself. The damage is not terrible yet, but as the change becomes more drastic conditions will worsen.

It is basic economics to realize that when the cost of hiring a worker is more than the profit that they will bring in, a company will not hire them. The cutoffs of large and small business make it more profitable to stay at 500 employees rather than reach 501 or more. This results in less hirings and shorter working hours.

Businesses will not want to grow in Seattle, and more will likely move out. However, what will they do when the national minimum wage is raised to $15.00 or more? There is nowhere left to run except out of the country our out of business. Preserve American jobs by taking the conservative and libertarian stance. The minimum wage results in more negatives than positives.

Author: James Kurlich

Questions? Ask away at jameskurlich@gmail.com

Works Cited:

@seanghiggins. “Early Data Show $15 Minimum Hurting Seattle’s Poor.”Washington Examiner. The Washington Examiner, 11 Aug. 2016. Web. 17 Oct. 2016.

“Minimum Wage Ordinance.” – LaborStandards. N.p., n.d. Web. 17 Oct. 2016.

Moran, By Rick. “Blog: Study: Seattle Minimum Wage Workers Have Hours Cut, Lose Jobs.” Blog: Study: Seattle Minimum Wage Workers Have Hours Cut, Lose Jobs. N.p., n.d. Web. 17 Oct. 2016.

“Early Returns From Seattle’s Minimum-Wage Experiment.” Bloomberg.com. Bloomberg, n.d. Web. 17 Oct. 2016.

Forbes. Forbes Magazine, n.d. Web. 17 Oct. 2016.

Picture is labeled “free to use, share or modify, even commercially”. This is not our own picture, and the website does not endorse ours in any way. There was one change made to this picture and that was to make it larger. URL:

(https://commons.wikimedia.org/wiki/File:Fast_food_workers_on_strike_for_higher_minimum_wage_and_better_benefits_(26409539186).jpg)

 

 

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