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15 Reasons Raising Minimum Wage is Bad


It’s impossible to set a fair national minimum wage
Photo credit: Fibonacci Blue / Flickr

One of the most heated discussions today in the labor environment is that of the minimum wage and its future. There are many who are demanding a very substantial increase in the minimum wage, to what they term a living wage. They see a minimum level of hourly compensation more than double the current federal $7.25.

On the other side of the issue are those who contend that any increase would cripple many companies and stall the economic recovery.

How one comes down on the issue depends on a number of factors, including political leanings. Here are 15 reasons presented as support for leaving the minimum wage as it stands. It is to be noted that some of these reasons feed on each other, overlapping and reinforcing certain principles and consequences.

15. It’s impossible to set a fair national minimum wage

Few of those involved in the minimum wage debate argue the reality that the cost of living for individuals and families varies widely across the United States. According to an analysis done by the American Enterprise Institute, the variance in these numbers is really quite large.

For example, if Des Moines, Iowa, had a minimum wage of $10.10, that would only equal a $4.12 per hour rate when measured by the real costs of working and living in New York City. On the other hand, it would take $24.77 to equal the Des Moines rate.

These numbers illustrate the reality that even if there was consensus on the need for minimum wage, the argument would move to what is a “fair hourly rate” from city to city. No federal law will ever be supported that does the “right and fair thing” by mandating a worker to receive $14.67 in Los Angeles and only a cost-adjusted $10.10 in Des Moines.

According to the Economic Research Institute, national companies already invest a great deal of time in matching compensation to local and state levels. There are complex studies and geographic-specific databases used to establish these standards for each company. One of the main arguments against mandating a higher flat minimum across all states is the ripple effect on other compensation levels, as discussed below.

Regardless of that specific issue, however, any mandated increase at the federal level will affect costs in cities with lower costs of living disproportionately from those with higher costs.

However, as the above numbers illustrate, the individual states can seek to achieve some level of parity within their borders.

This local freedom to act has the added value of allowing a state to determine the type of business versus employee environment its leaders choose to foster. The other advantage of such state-based minimums is the fact that businesses will then be able to make decisions based on each state’s relative cost of doing business.

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