My best idea ever

Andy Matthews

Every week, NPRI President Andy Matthews writes a column for NPRI's week-in-review email. If you are not getting our emails, which contain our latest commentaries and news stories, you can sign up here to receive them.

My best idea ever

Here at NPRI, we’re all about solutions, and boy, have I got one for you today.

I think we should increase the minimum wage to $1,500 an hour.

I thought of this after reading about President Obama’s push to increase the minimum wage to more than $10 an hour, and then seeing a study touted by liberal groups here in Nevada calling for Silver State policymakers to go even further and set the minimum hourly wage at $15.

The way liberals explain it, hiking the minimum wage would increase workers’ take-home pay, which would give them more money to spend in the economy, which would create more jobs, and so on.

So I figure, why think so small? If a minimum wage of $10 or $15 an hour would produce such wonderful benefits, then just think about how much economic prosperity we could generate by jacking the rate all the way up to $1,500. Or how about $15 trillion?

If that sounds absurd, it’s because, obviously, it is. But it’s also a logical extension of the argument liberals make when they call for minimum-wage increases. The truth is the opposite. A $1,500-an-hour minimum wage would be more destructive than $10 or $15 an hour, but even those smaller amounts would have a destructive impact.

Minimum-wage laws kill jobs. And increasing the minimum wage would kill even more of them. This is true for a very simple reason: If you increase the cost of something to an employer, he will be able to afford less of it. This means that entry-level jobs will disappear or, as we’re seeing already, human workers will be replaced by machines. In other words, minimum-wage laws hurt the very people they’re intended to help by pricing those people out of the labor market.

What advocates of minimum-wage increases overlook is that jobs at that level serve as entry-level jobs that let young or inexperienced workers gain skills and then move up. They’re not supposed to support a 35-year-old head of household. But that’s exactly what these advocates claim, which is why they’ve adopted the term “living wage” to describe what they seek to implement.

But a “living wage” would turn into “no wages” for many workers, because higher minimum wages increase unemployment. For instance, the teen unemployment rate in Nevada was over 25 percent in 2012, and for young adults it was over 15 percent. These are the individuals who are hurt the most by minimum-wage laws, and they’re the ones who will suffer even further if liberals succeed in pushing the rate even higher.

You don’t create jobs by making it more difficult for employers to hire anybody. To believe otherwise requires one to ignore not only the most basic laws of economics, but also the kind of common-sense thinking we all practice in our day-to-day lives.

But here’s an idea for those who disagree: If you don’t think current businesses are paying people what they’re worth, then go open your own business and pay people whatever you want. In a market economy, anyone can be an entrepreneur. If others are exploiting workers, then you have a great opportunity to steal surplus value by hiring them away with higher wages and putting the incumbent firms out of business, stealing their market share. You just have to hope your customers will be willing to pay your prices, but I’m sure you’ve thought that all through.

I’ll be curious to see how it goes.

Thanks for reading, and have a great weekend.

Andy Matthews
NPRI President

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