The Democrats seem to be holding in their hip pocket a proposal to raise the national minimum wage or at least use it as an issue in the individual states. Some commentators from the right have called this demagoguery, in effect they accuse liberals of buying votes with the meager dollars of small businessmen who are the most likely employer to create minimum wage jobs.
There are, of course, kind hearted souls who believe that a raise in the minimum wage will actually benefit the working poor and support it adamantly. The theory goes that poor persons should have a wage sufficient for a comfortable living. Indeed, in a perfect world every person would make 50 dollars an hour. The problem is that the minimum wage is not the way to see that this happens.
It is a fundamental law of economics that when you increase the cost of production of an item it is inevitable that its price shall also rise. Thus every rise in the minimum wage creates an equivalent inflation in the economy that effectively destroys the intended positive effect of the raise. This inflationary tendency then stimulates another call for a raise in the minimum wage. The result is a wage/price spiral. Leftists have stated that this did not happen as a result of the last minimum wage rise. They site the consumer price index. What they fail to note is that the prices that increased were not those big ticket items that are increasingly built through automated processes but the goods or services actually created by those on minimum wage. The irony here is that those are the very goods most consumed by those on a minimum wage: food, fast food and small consumer goods. Any one who has visited the grocery store for the last several years will note that the cost of many food products has increased steadily and dramatically.
A raise in the minimum wage, then, does absolutely nothing for those it is initially designed to help. It is a sad fact that this rise in the minimum wage actually does harm. It has a crippling effect upon anyone on a fixed income. This would be the elderly, other persons on social security, and any number of people who have low wage jobs - only not low enough to benefit from the projected raise. The wage/price spiral mentioned above degrades their income and makes living day to day more difficult than before. A leftist will say that many of the persons in this category have an income tied to the consumer price index. That is all well and good, but besides the time lag between inflation and a cost of living adjustment, there is also the fact that the consumer price index takes into account a myriad of items that these people would be unlikely to purchase (goods whose prices are kept down by technology). Thus the COLA raise will not reflect the true inflation for these individuals. The redistribution of wealth for minimum wage workers is then being taken out of the pockets of those least able to afford it. Grandmothers will not get their weekly breakfast at Denny's. The disabled will find a financial barrier placed in their path, and low income workers will find it even more difficult to put bread on the table.
In the end, only political demagogues who ignore the pain a suffering that would be brought about and the misguided will support a minimum wage raise. The compassionate and caring person will oppose it.
WJ Rayment
Lee Presser is temporarily off-line. He will return soon with his weekly, insightful comments. Until then, you will have to put up with me.
WJR
