By Brooke Ehlert, Colorado Christian University Student
President Obama recently pushing for a raise of the federal minimum wage laws, there has been a significant amount of debate on both sides on wage laws. Those who criticize the President’s plan state that this would discourage businesses from hiring. At a time a time when we need to encourage job growth, this is a serious concern, especially considering the fact that unemployment for those between eighteen and thirty is significantly higher than other groups. The fact that new minimum wage laws will apply government employee and contractors means that our taxes will be paying higher wages as well.
The minimum wage laws were enacted in 1938 by President Roosevelt. Since then, the rate and coverage has been increased significantly by Congress. While the states are allowed to set their own wage rates in accordance with federal laws, they are required to have some form of laws: either their own or the federal laws. According to the CATO Institute, these wage laws cover about 85% of the workforce. The goal of these laws was intended to help workers–particularly low skill workers, youth and minorities. Those who support these laws believe that they will help raise the standard of living for these people.
But what they neglect to consider is the impact on the economy and on business. On one hand, minimum wage laws were enacted as protectionist policies for unions and certain businesses. On the other, it was meant to help fight poverty. The basic model most people use is that the core components are a negatively sloped demand curve and a wage rate that clears the market and is not controlled by minimum wage. There are several flaws in this policy, however. Number one is that someone has to pay for this: minimum wage policy is a redistributive policy. And it has the tendency to increase unemployment because employers cannot afford to pay that much more to their workers, especially if they are a small business. Those who are hurt the most are the ones the policy is seeking to help.
But one of the major issues with the most current minimum wage laws is not the fact that it is simply a bad policy; it is the fact that President Obama is making this an executive order. In the past, this has been done by legislative action with support from both sides. With employees from certain places of employment seeking higher wages, and Democrats pushing for a raise in the minimum wage, Obama has decided to take matters in his own hands. Fox News suggests that President Obama brought this up in his State of the Union address to “avoid the appearance of being a lame duck President.” Whatever the President’s agenda, it is unprecedented to affect the minimum wage through an executive order, and those supporting it should reevaluate the impacts that minimum wages have had throughout history.
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