As a self-proclaimed moderate liberal, this may be counterintuitive to say, but here it goes: more government intervention in our economy is probably the last thing this country needs as it looks to sustain market growth.
Government policy in today’s world is viewed by many as the magic fix for all of our problems. When we run out of money and need more, we run to Uncle Sam. When we subsequently print too much money and hike up inflation, we run to Uncle Sam.
And when we feel like we are not being paid enough despite our lack of skills, we run to Uncle Sam. America was built on the ideal that everyone should have the chance to be self-sufficient; recent precedents we have set, however, ensure almost the opposite.
President Barack Obama, in an effort to help working class Americans bring home more money, has strongly advocated an astronomical 39 percent increase in the federal minimum wage, a policy that would raise it from $7.25 per hour to $10.10 per hour.
While this may sound great in theory, it is policies like these that spell doom for the American economy.
In order for true economic growth to be realized and for significant job creation to occur, businesses in America need to be supported, not trampled upon and squeezed for every dime of profits that are earned. Minimum wages laws in general violate the natural equilibrium of the markets: supply and demand.
The markets should determine what a person is paid because the market is what fuels competition. Why would a business pay a worker $10.10 if other workers with similar skills offer to work for $7.25 per hour? The reality is that, in general, the skills found in minimum wage roles are easily replaced. Because the market is in oversupply of unskilled labor, wages remain low. That is the nature of the game.
Government intervention does one thing effectively: it takes away market efficiency. And when market efficiency drops, everyone suffers. For example, let’s assume a firm in Manhattan has $100 to spend on wages. At the current minimum wage of $7.25, the firm can employ 13 people and stay within its budget. With the proposed increase in minimum wage, however, the firm can only employ nine employees. Not only is the firm forced to lay off four employees, but now the remaining nine workers have to do the same amount of work that 13 people were originally assigned to do. The minimum wage is just an incredibly effective way to increase unemployment.
According to the latest census, there are almost 28 million small businesses in America, all of which would suffer under additional regulation and government entanglement in the private sector. Let’s get this clear: the role of the government is not to make sure that everybody has money. The role of the government is to make sure that the Constitution is protected and that everybody has an equal right to life, liberty and the pursuit of happiness.
You want to pull people out of poverty? Use the $398 billion that the government spent on “safety-net programs” to give the needy access to higher education. Give people a more permanent solution instead of placing the blame on businesses who are fighting to survive. Give people a way to pull themselves out of mediocrity and pursue higher goals. Sure, the minimum wage increase would increase workers’ wages by 40 percent, but a proper education could raise their wages by 400 percent.
Helping the needy is of course a must, and I believe that significant donations of time and money to those in need is a social responsibility that should be expected of not only wealthy individuals but big businesses as well. Together, we must maintain our communities. What we don’t need, however, is Capitol Hill barging into our lives and telling us how we need to do that.
If the government can interfere with stipulations about minimum wage laws, what is stopping it from making “maximum wage” laws? What’s stopping it from putting restrictions on all prices of goods and services? This is a dangerous game to play and at this rate, the New York Stock Exchange will turn into the Big Brother Index.
America is about being self-sufficient and earning your keep. It’s about time we remember that.
Andy Rao is a graduate student in family studies and human services. Please send comments to firstname.lastname@example.org.