The Minimum Wage By T.S. Khanna, February 8, 2014.

Foundation for Better Government

(www.bettergovt.blogspot.com)

February 8, 2014

The Minimum Wage

By T.S.Khanna, February 8, 2014.

Raising the living standard by raising the minimum wage is a myth, not a reality.  In democracy, it is assumed that the voters understand and protect their interests.  However, facts do not always support that assumption.  Some voters, because of their ignorance and gullibility are continuously manipulated.

Raising the minimum wage of unskilled workers is a political ploy to solicit their votes, not raise their living standard.  There are several effects of raising the minimum wage:

1. Proportionate increase in the wages of the skilled workers;
2. Reduced financial ability of businesses compelling them to reduce number of employees;
3. Commensurate price increase in goods and services causing the minimum wage workers fall behind in their chase of the mirage of better living standard;
4. Failure of some businesses as they are forced to price themselves out of the market, sending more people to food stamps or unemployment benefits;
5. More unemployment of unskilled and skilled workers causing a setback to the whole economy;
6. More jobs moving out of the country to avail of cheaper labor elsewhere.
7. Raising the minimum wage does not espouse the interest of the unemployed, it hurts.

Raised minimum wage does not raise the living standard as the dollar depreciates to the same extent.  It has an additional adverse effect in creating more unemployment and pushing the jobs out of the America.

To raise the living standard, effort should focus on raising the purchasing power of the dollar.  Look at another scenario.  Abiding by the true principles of economics, if we let wages of unskilled and skilled workers be decided by the free market of supply/demand, some adjustment may be necessary in the prevailing wages with positive effects:

1. Financial potential of the businesses will improve;
2. With enhanced financial potential, businesses will expand employing larger number of people, reducing the unemployment;
3. Goods and services of competitive quality and prices will be produced;
4. Forced out jobs will come back to America;
5. American goods will be exported to other countries;
6. Dollar will be strengthened with greater purchasing power;
7. The living standard of the common man will be raised on a solid footing by creating more wealth of goods and services; not by printing more dollars.

Quite often, logical plans benefiting the entire society cannot be implemented in a democracy.  Everyone may have the equality of one vote, but everyone’s vote does not have an equal effect.  Votes of the gullible ignorant create a great setback for the whole society.