CARSWELL/Why raising the minimum wage is wrong
President-elect Joe Biden says he wants Congress to raise the federal minimum wage from $7.25 to $15 per hour.
About time too, you might think, seeing as there’s not been an increase in the minimum wage in over a decade. If everyone in America has to be paid at least $15 an hour, it would boost paychecks and reduce poverty, right? Wrong.
What sounds like a good idea in Washington, D.C., might actually be bad for Mississippi — and here’s why.
Passing a law to force every business to pay everyone at least $15 per hour does not suddenly make every employee worth $15 per hour.
If a local business is currently paying one of their new entry-level staff say $12 or $14 per hour, raising the minimum wage will mean one of two things; either the employer takes the loss and pays someone more than they are worth, or they let them go.
Making it more expensive to hire people means that fewer people will be hired. Instead of a bigger paycheck, for some, there will be no paycheck at all.
Right now in Mississippi, according to federal estimates, around 4 percent of people are on the minimum wage. Studies suggest that these tend to be employees coming into the labor market in entry-level positions. In other words, they are likely to be on the minimum wage for only a short period of time before they progress up the pay scale and earn more.
Far from helping employees, doubling the minimum wage would make it illegal for some people to sell their services to a local employer.
“But businesses can afford to pay more” I hear some people say.
Really? Some businesses will be able to, not because they have a magic supply of money, but because they will be able to pass on the costs to the customer. But what about some of the smaller local businesses where you live?
Thanks to Covid, many smaller firms in the retail and service sectors are already struggling. Many simply won’t be able to afford higher wages or pass on the costs to their customers.
Do we really want to introduce a measure that will hit small, independent businesses hardest? There are plenty of local ministries in our area that are going to struggle with higher costs, not to mention start-ups.
Wealth doesn’t come from passing a law that gives one group of people a legal right to resources. It comes instead when entrepreneurs are free to bring people and ideas together and give customers what they want. If the minimum wage is set too high, it makes it harder for that to happen.
Imposing a $15 per hour minimum across the whole country makes no allowance for the condition of the local economy. Insisting that a uniform rate applies right across America, in Mississippi as well as Massachusetts and Michigan, just doesn’t make sense.
If there is to be a minimum wage at all, then we should at least allow different states to set the rate according to the condition of their economy. That way we could see the effect of the different rates in each state. If one state set the rate at say $16 per hour, with no discernible downsides, we could follow suit. If, on the other hand, a high rate in one state led to higher unemployment and business failure, we would know not to do the same.
Washington seldom gets things right when it imposes a one size fits all plan. It’s time to let each state decide on this for itself.
Douglas Carswell was appointed President & CEO of the Mississippi Center for Public Policy in January 2021. A Member of Parliament in Britain for twelve years, Douglas was re-elected every time he stood, and in 2014 achieved one of the largest swings in any election in British history.