Barack Obama

9 Reasons Why Raising the Minimum Wage Is a Terrible Idea

It's time for economic facts, not fallacies.


President Obama and congressional Democrats are pressing to increase the federal minimum wage to $10.10 an hour. Here are nine reasons why that's a bad idea.

1. It's a big country. The costs of living, especially housing, vary widely in America from state to state and city to city. If the point of raising the minimum wage is to provide a "living wage," why should the minimum wage in low-cost areas such as Texas or Oklahoma be the same as in high-cost areas such as San Francisco or Manhattan?

2. The states are already taking care of it. Twenty states and the District of Columbia already have minimum wages higher than the current federal minimum of $7.25 an hour.

3. Private industry and the free market are already taking care of it. Even low-skill, entry level positions in many areas already pay higher than minimum wage.

4. As an anti-poverty tool, it is a blunt instrument. A post by David Henderson cited by the chairman of the Harvard Economics Department, Greg Mankiw, points out that a lot of minimum wage earners are second or third-job holders in households with other income. That could include a teenage summer employee whose parents both have jobs. Other minimum wage workers may include retirees with income from savings and Social Security who own their homes mortgage-free.

5. It's not clear that it's constitutional. The Supreme Court, in its opinion in the 1923 case Adkins v. Children's Hospital of District of Columbia, made a strong argument that a minimum wage was a violation of the constitutionally guaranteed freedom of contract embedded in the Fifth Amendment's language about due process and the deprivation of liberty and property: "To the extent that the sum fixed exceeds the fair value of the services rendered, it amounts to a compulsory exaction from the employer for the support of a partially indigent person, for whose condition there rests upon him no peculiar responsibility, and therefore, in effect, arbitrarily shifts to his shoulders a burden which, if it belongs to anybody, belongs to society as a whole." The Court later, in the 1937 case West Coast Hotel v. Parrish, reversed Adkins by a five to four margin. But maybe the court was right the first time around.

6. Even if the freedom of contract isn't protected by the Constitution, it's a natural right that should not be infringed. As President Kennedy put it in his inaugural address, "the rights of man come not from the generosity of the state but from the hand of God." If two free people want to enter into a voluntary, consensual agreement that doesn't infringe on anyone else's rights, why should the government stop them? If someone wants to work for $5 an hour, and someone wants to hire that person for that much, and no one is forcing either one of them to enter into the agreement, by what authority does government step in and stop them?

7. It would eliminate jobs. Ordering businesses to pay entry-level workers more will make them hire fewer of them, and consider replacing more workers with robots or computers. That's good if you are in the robot or computer business, but not so good if you are trying to combat unemployment. The nonpartisan Congressional Budget Office estimated that President Obama's proposed $10.10 wage, once fully implemented, "would reduce total employment by about 500,000 workers."

8. It would reduce the incentive for low-wage workers to get an education and move up to a higher-paying job. The lower the minimum wage, the more eager a minimum wage worker would be to enroll in a community college course at night, improve his or her skills, and apply for a higher-paying job. Making the entry-level jobs higher paying increases the risk that workers will get stuck in them for longer instead of moving on to something more rewarding.

9. It's a sneaky way to increase welfare spending and raise taxes. Raising taxes to spend more on welfare is a political loser. But raising the minimum wage puts money in the pockets of working poor people, at the expense of business owners (and of consumers who would pay in the form of higher prices). If politicians want to increase the earned income tax credit or other work-related welfare benefits, they should do the hard work of building political support for such policies, rather than choosing the roundabout approach of a minimum wage increase.

NEXT: 5 Reasons Washington's Proposed Restrictions on Medical Marijuana Have Patients Worried

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  1. 10. That bozo Obama favors it.

    1. Nobody under the age of 100 uses the word “bozo.” Why does it appear so frequently in barely literate right-wing rants?

      1. Yawn.

      2. Tony|3.3.14 @ 5:00PM|#
        “Nobody under the age of 100 uses the word “bozo.””

        So are you going to do the world a favor and die young?

      3. Because Bozo was an annoying, largely talentless, clown. And that also describes soooooo many of the Political Class.

      4. Nobody under the age of 100 uses the word “bozo”?

      5. Why do you spend so much of your time reading “literate right-wing rants”, much less the time to actually reply to one?

  2. Alternative title: “Since These Are the Best Arguments We Could Muster against Raising the Minimum Wage, Looks Like We Might as well Raise It.”

    1. Yawn.

    2. I agree! In fact, I think the government (our Lord and Saviour, our Protector, our Lover) should build a gigantic money plane that flies over the country and drops $1000 dollar bills over every town so everyone can finally have enough money to live and follow their dreams!

    3. I’ll generously assume you are employed and make more than minimum wage.

      So, it seems your argument is essentially, “eh, won’t affect me. Let’s raise it.”

      1. I think that is pretty much the point of most who agree with raising everyone’s minimum wage beyond x amount. Not much thought on what it means beyond “everybody make more money” instead of the cost/price increases that go along with it.

        Also, they don’t seem to realize that it is as Stoll says: a creeping tax. Higher wages means more money per paycheck. In the end, the fewer workers left over will actually earn roughly the same amount of money per check because they pay more in. Woohoo for freedom and equality (which are absolutely the same!)!

        Math thinking is hard – feeling good is easy.

    4. If we should raise it to $10.10, why not $17.50? If I want to raise it to $17.50, does that make me a smarter economist than Obama?

  3. Because saying “God agrees with me!” is always a nice, convincing addition to any argument.

    1. Whoever is playing Tony Clifton today: I love the way you don’t express even a single sentient refutation of any of the points, specifically how it is moral for the state to interfere in an agreement between consenting parties. The best you can do is mock one of the most beloved progressives of the 20th century? Where are the liberals with their mantra about the government keeping its laws of their bodies?

      1. My deity said thou shalt not deprive a worker of a living wage, so there. Plenty of great statesmen have invoked deities. It should be taken for what it’s worth.

        an agreement between consenting parties

        If only that’s how it worked in the labor market. The entire reason a labor movement came into being was because of the disparity between the negotiating leverage of bosses and workers. The minimum wage is just one of many important reforms that movement achieved, resulting directly in the most prosperous society in history.

        Laissez-faire movements, on the other hand, have had many great successes creating corrupt kleptocracies and making people in general miserable.

        Yes, it is moral for the government to intervene between to parties when one party is abusing the other. Don’t act like this can’t happen to workers in a free-wheeling economy. It is standard practice in places without strong labor laws.

        Stoll finally gets around to a valid argument when he talks about reduction in employment. But he doesn’t weigh that against the potential benefit for those who remain employed and the economy as a whole.

        1. Stoll finally gets around to a valid argument when he talks about reduction in employment. But he doesn’t weigh that against the potential benefit for those who remain employed and the economy as a whole.

          Please, please, please go and shout this from the roof tops. I’m sure those unemployed people will be really happy to hear that they can’t work so that that other guy could get paid a little more, and it helps the economy as a whole dontcha know!!

          1. In fact, my happiness is on pare with Tony’s – I find it great when fewer people make more money at the expense of a larger amount of people who will be jobless or broke! Progress!

            1. It’s funny because Tony’s caricature of libertarians is of greedy white guys who want to enrich a select few at the expense of poor and middle class.

              And here is Tony arguing that we should be enriching a select few at the expense of the poor and middle class.

              1. Haha, pretty much. Isn’t it lovely when greedy, blood sucking libertarians actually have more sympathy for the interests of the poor/low-skilled labor force than the progressives?

                (Or perhaps we should start calling them “regressives”?)

                1. I’ve been calling them regressives, they cling to a worthless ideology that was abandoned in large part by the 1980s due to the abysmal failure of the economic systems in all countries it touched
                  but hey at least everyone was equally poor

        2. The minimum wage is just one of many important reforms that movement achieved.

          If by “reforms” you mean keeping those uppity negroes from taking the union members’ jobs, then, yes, I agree.

          Central planning, on the other hand, has had many great successes creating corrupt kleptocracies and making people in general miserable.


          It is standard practice in places without strong labor laws.

          You know that whole correlation-causation thing right? In reality, the relevant correlation is the wealth (or lack thereof in this instance) of the populace. But, of course, interference in the economy must lead to greater wealth production, so…

          But he doesn’t weigh that against the potential benefit for those who remain employed and the economy as a whole.

          Because you know, it’s totally indisputable that the economy as a whole will benefit… Also, screw the losers.

        3. “If only that’s how it worked in the labor market.”

          If someone offers to pay me $5/hr. to work for him, and I accept the offer, then that’s exactly how it worked. Just because you don’t like it, doesn’t mean it wasn’t voluntary.

        4. Tony|3.3.14 @ 5:16PM|#
          “My deity said thou shalt not deprive a worker of a living wage,”…

          Which you cannot define. So fuck off.

        5. Hmm – I can write down some platitudes too:
          “There’s not justice, just us.”

          “The first casualty of war is the truth.”

          “Capitalism benefits the few at the expense of the many.”

          “Capitalism needs crisis to survive.”

          “Libertarians are paranoid weirdos who don’t trust the government, especially when the government is us.”

          “The early bird gets the worm.”

          1. “Freedom from want!”

            1. “Freedom from fear!”

        6. “If only that’s how it worked in the labor market. ”
          Did you force your boss to employ you at gunpoint? Did he force you to work at gunpoint? No? Then it’s consensual.

          ” The minimum wage is just one of many important reforms that movement achieved, resulting directly in the most prosperous society in history.”
          There is absolutely no evidence that the minimum wage made the most prosperous society in history. The west was already that by the time it came in.

          “Laissez-faire movements, on the other hand, have had many great successes creating corrupt kleptocracies and making people in general miserable.”
          Such as where? In fact it’s highly interventionist places like Chile (before they started listening to Friedman) that were miserable and kleptocratic.

          “Yes, it is moral for the government to intervene between to parties when one party is abusing the other.”
          And how is paying the agreed wage “abuse”?

  4. my buddy’s step-mother makes $63 /hr on the computer . She has been fired from work for ten months but last month her payment was $17491 just working on the computer for a few hours. have a peek here………..

    1. sEE? mInIMUM wAgE LAwS aeR DUMB! WITH my cOMPUter i CAN pRINT MoNEY!

    1. Um:

      “If you could have a minimum wage of $15 and it didn’t hurt anything else, I would love it,” he said. “But clearly that isn’t the case.”

  5. Does anyone think that Obama actually wants to raise the minimum wage? This is all politics. Obama is calling for $10.10 minimum wage because he knows there is no way the Republicans will support it, and that will give the Democrats something to campaign on in the 2014 midterms.

    Not to mention help people forget about the disaster that is Obamacare.

    1. …”Not to mention help people forget about the disaster that is Obamacare.”

      He’s campaign to screw the pigs behind the barn if he figured it would distract people from is signature disaster.
      Only shitpiles like Tony and shreek still support it, and Tony’s ignoramus enough to think the min wage is a good idea.
      What an imbecile.

      1. It’s a win-win: some folks get a raise and he’ll get the credit. Other folks will get fired or not hired, so it will show the need for more welfare and unemployment benefits and job programs.

        1. In addition, he can always blame EVUL BIZNUSSEZ for firing the innocent, doe-eyed poor.

          1. See! We made them sign this affidavit saying it wasn’t because of minimum wage. We just said they would be forced to hire them again for $200K a week if they didn’t.

        2. ^this^

  6. If it weren’t for the minimum wage, maybe Tony would have a job, and not be living in his dad’s basement trolling Reason all day in his pajamas.

    1. It’s not bad enough that he is still mooching off of his father, he needs to wear his pajamas too?!?!

  7. 8. is ridiculous, how is someone making $5/hour going to get an education that’s worth anything when they can’t afford a bus ticket

    1. Why would a 16 year old need to pay for their education?

    2. Not all forms of education require shelling out $10K/year

    3. Grants, scholarships and loans. Anyone that wants an education in this country can get one. $$$ are NOT an excuse at this time. There are also a myriad of programs the help those without any substantial income. I think a lot of these programs are a waste, but they exist and if you are poor and don’t use them it is because you lack the drive to succeed, not because you can’t afford it. Also, when you can’t afford a bus ticket getting your GED, taking classes at an ultra-low-cost community college, etc. will all help you move up a rung. Focus on the next rung, not hey I am poor and therefore can’t try.

    4. Agostage|3.3.14 @ 5:20PM|#
      “8. is ridiculous, how is someone making $5/hour going to get an education that’s worth anything when they can’t afford a bus ticket”

      I think we have a contender for ‘Who is dumber than Tony today?’

      1. I’d like to point to the fact that if the government weren’t propping up out-dated institutions through massive (what amounts to) subsidies, our education would be much more affordable to everyone.

        This “education for all” idiocy that we’ve gotten ourselves into through state intervention has done the exact opposite of its intentions. The free market is much efficient, not to mention cheap.

        1. The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits ? self-discipline, the ability to defer gratification, etc. ? that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them.

          — Glenn Reynolds

  8. I think we should find this re-animation of the Tony-troll suspicious at best.

    1. It could be zombie Tony. After all, zombies have replaced vampires as the cool monsters du jour.

  9. Unfortunately, the reasons for are far more important to left wing pols:

    1. They can grandstand saying they gave the country a raise.

    2. There is no direct cost to government raising the minimum wage.

    3. Negative effects are largely hidden or can be blamed on greedy owners.

    4. It an exercise of micromanagement of the relationship between employer and employee. Leftists gdo not nelieve in the right to contract.

    1. 5. The donkeys get to buy votes without even having to process the money!

  10. A nation that can set a minimum wage can set a maximum wage or dictate that there be only a single wage. FDR created wage controls that are still creating carnage in health care costs.

    But since when has America concerned itself with constitutionality. This is a nation where both the state and federal governments can regulate and even permanently strip citizens of inalienable rights.

  11. Well, the actual reason is that minimum wage laws REDUCE THE TOTAL EARNINGS OF THE POOR. (actually, anyone it applies to). I mean, everyone can see that raising the minimum to $100/hr wouldn’t make people better off. Why do they think $10.10 will?

    If business were making unusual profits off of minimum wage workers they would be falling over each other to hire more of them. Unemployment in that sector would be unusually low. Last time I checked black teen unemployment was 38%. That isn’t low.

    1. (Prog persona warning)

      Nuh uh! It will make everyone rich because they get to make more money from those greedy evil business enslavers. besides, anyone who disagress is obviously anti-science and hates foreigners and free speech.

    2. …”I mean, everyone can see that raising the minimum to $100/hr wouldn’t make people better off. Why do they think $10.10 will?”…

      Not sure anyone but bootlickers like Tony do. It’s just a good campaign issue.
      People get screwed? When’s the last time you saw a proggy care about the result rather than a stated intent?

      1. Proggy persona warning:

        But it feels so much better when there’s bigger numbers. And feelings always are better than facts.

        Besides, facts are fiction because the greedy anti-science imperialists made it that way.

        1. PS – not laying it on too thick with the proggy sarcastic thing, I hope?

    3. Only if they can sell what those employees produce.

  12. The CBO is now an authoritative source. That should make future discussion easier.

    1. Economics is about as soft of a science as you can get.

      We’d be much better placing ecologists in their stead, at least they understand that you can’t add something to an ecosystem or remove it without fucking the whole thing up, and it is best to just leave things be in their natural state.

      1. Hmm, now I’m thinking that the eco prefix was chosen for a reason, and it looks like today’s economists need a history lesson.

        eco – relating to the environment

        nomics – laws

        Taught myself something, I think.

  13. 10: It enjoys broad bipartisan support and experience tells us that “Bipartisan” means “So stupid that pillocks from both parties are in favor of it”.

  14. 10. Because further increasing the amount of dollars in the money supply really helps the poor.

  15. $335,554,333,222,337.00 per hour as min wage, Ah Sez!!! Ah haz now PROVEN beyond a reasonable doubt, Ah Is WAY the FUCK more compassionate than ALL of ye miserable poor-people-fuckers, ALL put together!!!! BWAH-ha-ha-HAAA!!!!

    1. Oh, hey, wait a minute or 2 here, all you poor un-enlightened, un-connected, non-political slobs? My favorite niece’s bother-in-law, who is struggling a bit? He wants special exemption, so that he can actually GET a job, and NOT be on welfare? HE wants to be cut a SPECIAL deal, and work for a mere $335,554,333,222,337.00 (minus $5,000) per hour as min wage? Y’all won’t mind that a BIT, will ya, as I slip it under the radar? Special privilges for Special Pepples, ya know? GAWD knows, Ah is VERRA Special!!!!

  16. One reason why it is a good idea: So I am not subsidizing employers by providing welfare for his employees.

    1. The real reason it’s a bad idea: So you are not subsidizing the unemployed it creates. How much do you think you’d be subsidizing the individuals if they weren’t working at Walmart, McD’s, etc.? Here’s a hint: More than if they are working.

      I know it’s hard to understand, but you can do it if you try. I believe in you!

      1. Gibberish is always hard to understand. The people who buy something from a business should pay the entire cost of its production and that includes what it costs it’s employees to live.

        1. Yeah! Why should poor minority teenagers who drop out of school work for lower wages to gain skills to be able to earn more money in the future? Fuck em’, that’s what welfare is for. Until the lowest wrung in any business is a 30 something making a living wage, we live in an evil, corrupt society.

          *Sarcasm, if you didn’t notice. I’m mocking you because you don’t realize labor laws have a long history of screwing over poor minorities to protect white jobs.

    2. “So I am not subsidizing employers by providing welfare for his employees.”

      Many benefit from welfare and will NEVER accept a reduction in welfare only because their hourly salary marginally increased.

      “You have pay for the welfare of minimum wage workers” (if this is your position) is perhaps the weakest argument for raising the minimum wage. If we raised minimum wage to 15 bucks tomorrow, whatever cuts to welfare Obama might agree to will be offset by a tsunami of inflation and increase in the cost of living. Those Walmart workers who might take themselves off welfare will find themselves needing additional assistance.

      Welfare spending will happen independent of people’s spending power. If Obama reduced eligibility for welfare commensurate with a rise in spending, a lot of people will be unhappy.

  17. 10. Say’s Law. Every time the government drives a business out of existence or forces a worker out of the workforce, the entire economy suffers. Increasing the cost of labor and removing workers & businesses (low-margin businesses in poor neighborhoods and small towns in particular) from the economy will reduce aggregate supply/demand, making us all poorer for want of more options for exchange.

    1. Then everybody should work for a bowl of gruel a day so there can be even more businesses.

      1. Google market wages and marginal value.

        You’re welcome.

      2. If you are stupid enough to get yourself into that contract and that’s all you feel you are worth than so be it. I went out and got an education for free through the Navy, anyone under the age of 35 can do it too all you have to do is serve 4-8 years of your life, mine was 6 but i came out with the knowledge and training to land a job that would be well paid so long as the min stays put, if the min goes up i do not get a pay increase, my purchasing power slumps and i am living in greater poverty than i already am. this is how minimum attacks the poor
        No matter what i have to keep spending more on training and living to keep ahead of the min as it eats up my purchasing power and drives me into poverty

        1. I went out and got an education for free through the Navy.

          I’m sure the tax paying public would disagree with this remark. Additionally the choice cost 6 years of your life which could have spent doing something else. Nothing is free.

  18. I think minimum wage laws violate the rights of both employer and employee to make contracts freely, but there’s another reason to avoid them.

    Since 1933, when FDR changed the gold value of the US dollar, or at least since 1971, when Nixon set the buck afloat, any “minimum wage” has been nonsense. In practice, the current minimum wage defines the dollar! If it is $10 an hour, then a dollar is equivalent to the value that will buy 6 minutes of the least productive labor an employer will put up with. If the prospective employee can’t produce that much, he’ll either not be hired or will be let go if he can’t be trained up to that standard. Luckily, after minimum wage increases, inflation usually erodes the dollar’s value and, eventually, and not before many individuals experience at least temporary disruption in their low wage employment, a new equilibrium is reached. This is a crude tool with unpleasant side effects for everyone, not the least of which is an erosion of support for a stable currency.

    Another bad side effect. What if you currently make $10.10 an hour? When the MW is increased to that level, will your employer bump you to $14.07 to maintain your “multiple of the minimum?” I don’t think that’s the way to bet.

    I would not support the direct subsidy of low wage workers, but that’s more honest and can be targeted to heads of poor households, as in the case of the Earned Income Tax Credit. Increasing the EITC is a less bad option. – Kevin R

    1. no my employer will probably have to even forgo a potential raise for me as he re cooperates his losses (forced upon him by the government) on the least productive most expendable workers AKA the minimum wage drones.
      Excellent posting, this is the best most comprehensive refute of the min I’ve ever read

  19. For those who are too poor to afford an education there is always at least 2 branches of the armed forces you can hide out in and almost never have to see combat unless you volunteer.
    So all the REgressives that feel point # 8 is BS, feel free to serve your country for a change because I’m sure the country is sick of serving you

  20. I spent 8 years in the MW rat race (16-24). . . washing dishes, flipping burgers, and the like. I hated it so much that it was easier to be jobless, broke, and homeless – which I was for at least half of those years.

    At 24, I learned a more valuable (and more marketable) set of skills – haven’t worked in fast food, or for MW since. Granted, I only make about $5/hr more than the Fed minimum. . . but it’s a wage that both my employer and I voluntarily agreed to.

    I think it’s kind of odd that, having concluded that using guns and violence to coerce a wage is an acceptable process. . . why limit oneself to only $10.10/hr? Why not go for the gusto, and use those guns to get a MW of $1,500/hr? I mean, we’re not talking about scope here, only scale. A $1,500/hr MW would eliminate poverty forever, right?

  21. Fifty years ago, the economist Milton Friedman wrote that the minimum wage would do great damage “To Negroes and Negro youth”. No group is in greater trouble today than them. Now President Obama has proposed increasing the minimum wage to $10.00.
    Why not an amendment to his proposal which would scale back the wage by 10% a year to help bring youth into the workforce?

    $5.00 for age 15
    $6.00 for age 16
    $7.00 for age 17
    $8.00 for age 18
    $9.00 for age 19
    and then $9.00 for age 20 and above.

    It has been said that the minimum wage was created to protect union wages. Isn’t it time to “spread their wealth around? As an employer, wouldn’t you hire a kid for $5.00 where you would leave the job open if you had to pay an adult $10.00? Wouldn’t you be inclined to keep the kid if he learned from being employed, even through these increases?

  22. It’s time for economic facts, not fallacies.

    Economics is a worthless pseudo-science. Therefore, there are no economic “facts”. They are just arguments. Arguments based on pure speculation.

  23. Instead of raising minimum wages why not deport illegals and fine and jail their employers?

  24. We should do away with the whole concept of minimum wage.

  25. Those are some of the worst arguments I have ever heard. I really hope this article was meant to be a joke.

    1. So, I assume you don’t actually have any counter arguments.

  26. Hey, I know… instead of raising the minimum wage, let’s use the coercive power of the state to MANDATE lower prices for EVERYTHING! Problem solved, huh?

    And, if by chance you DON’T think it would be smart (legal alone constitutional, moral, etc.) to MANDATE lower prices for everything, how in the H@ll can you support RAISING prices (for labor)?

  27. I take it this econ book has a whole chapter on making Walmart family very rich!! Big companies should pay the living wage. They are subsidised by welfare not the workers.

    The comment it’s a big country is as bad as saying “it’s a big world lets not fix any of the problems cause it’s just to complicated” and I am suppose to believe you understand complex economics!!!!!

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