Many Americans think of the minimum wage as a means of raising the income of the working people. However, the minimum wage is not the best way to combat poverty. In fact, the minimum wage does more harm than good. The list of its negative effects is a long one: it causes unemployment; it prevents unskilled workers from getting the on-the-job training they need; it encourages teenagers to drop out of school; it promotes the hiring of illegal aliens; and it increases welfare dependency. For all of these reasons, the minimum wage should be eliminated.
To evaluate the minimum wage, we must first understand why it was originally created and what its historical effects have been. The minimum w age was introduced in 1938 by President Franklin Roosevelt. According to Dr. Burton W. Folsom (1998), a senior fellow in economic education for the Mackinac Center for Public Policy, the driving force behind this new legislation was not the plight of the working poor but the political might of the highly paid textile workers of New England, who were trying to protect their jobs as they faced competition from Southern textile mills. The Southern mills were able to produce cloth of equal quality more cheaply than their counterparts in the North because of the lower cost of living in the South, which allowed Southern factories to pay lower wages to their workers. In response, Northern politicians successfully fought for legislation that would force Southern textile mills to raise wages, against the objections of Southern congressmen and many economists who warned that ”people whose skills and experience were [worth] less than whatever Congress decreed as the minimum wage would be priced out of the labor market” (Folsom, 1998).
According to Folsom (1998), the dire prediction of those who opposed the minimum wage came true; the wage increases mandated by Congress caused unemployment levels to rise in 1938, when the minimum wage was instituted, and again in 1956 and 1996, when it was raised. Classic economic theory explains this effect in the following way: The labor market is subject to the forces of supply and demand. Workers determine the supply of labor, and firms determine the demand for it. If no minimum wage restrictions are imposed on the market above this equilibrium level. However, if a minimum wage is applied to the market above this equilibrium level, the quantity of labor supplied will exceed the quantity of labor demanded. The result is unemployment (Kersey, 2005). There is little debate about this basic cause and effect relationship. In fact, a 1983 survey by the General Accounting Office “found virtually total agreement that employment is lower than it would have been if no minimum wage existed” (Bartlett, 1996). According to Pete du Pont (1995), policy chairman of the National Center for Policy Analysis and former governor of Delaware, statistics show that, on average, a “10 percent increase in the minimum wage decreased employment by 2.7 percent” (p. 73).
Those in favor of the minimum wage argue that the increase in unemployment is offset by the increase in income of those workers who remain employed. In a paper published in 2005 by the Center for Economic and Policy Research, Heather Boushey and John Schmitt present statistics leading them to conclude that “increasing the federal minimum wage to $7.25 per hour over the next 26 months.....would raise the annual earnings of the average full-time, full-year minimum wage worker by $1520 per year” (p.1). Proponents argue further that “higher wages at the bottom often lead to better education for both workers and their children” and that as “employees become more valuable, employers tend to boost training and install equipment to make them more productive” (“Myth”,1999,p.170). According to an article published in 2004 by the Business Council of New York, however, these benefits are deceptive; the lowest wage workers won’t receive more pay or...