Hillary Clinton garnered praise from organized labor for backing New York’s increased minimum wage. Organized labor is a special interest looking for its share of patronage from government. Whether organized labor praises any policy position is not the question. The question is, what does that policy position do for (or to) society at large.
It is illegitimate in a free society for government to use the force of law to modify what would otherwise be voluntary exchanges. Consider; I am willing to work for you for $1 an hour. I’ve judged it in my best interest to do so. Otherwise, I would work elsewhere.
You are willing to pay me $1 per hour and are satisfied with my services. The government forces you to pay me $2 per hour and you say, “well, at least everyone else has to pay more too. I’ve lost no comparative advantage. But now my profits will suffer unless I raise prices.”
What do you think you will do? You will raise prices because you will lose no comparative advantage in doing so. You know that everyone else who hires so called “minimum wage workers” will make the same decision to raise prices.
However, later, when your customers decide to purchase less of your product, you will suffer. Over time, you may realize your sales have decreased somewhat so you may reduce prices a bit in order to increase sales. But your profit margin will then be lower than it was before the government mandate came into effect.
Through this process, the immediate benefit of higher wages for me, is counterbalanced by your widely dispersed and far less identifiable lower profits and by higher prices for consumers. Finally and ironically, those higher prices will end up neutralizing the original coerced pay raise. Those who received the mandated pay increase have living expenses which must rise as well. They are consumers, and no consumer is immune from the choice which must be made; pay more for the product or use less of it.
The minimum wage is a ruse used by the political class to dupe voters, nothing else. At the end of the day, the statist politicians get what they want…votes. Everyone else is, at best, left in the same situation as before the mandate.
In a free society, government has no business compelling the terms of voluntary transactions. When it comes to the economy, we must demand that our elected officials “make it free and leave it be”.
