Why don’t we raise the minimum wage to $100 an hour?

Victor Joecks

If money grew on trees the minimum wage would be a great idea
Because of a 2006 constitutional amendment, Nevada’s minimum-wage will increase by 70 cents an hour on July 1.

Nevada’s hourly minimum wage is set to jump 70 cents, or 9.3 percent, on Thursday, from $7.55 to $8.25 for workers who don’t receive health benefits through their employer. For workers with company-sponsored health insurance, the minimum will rise 10.7 percent, from $6.55 to $7.25.

Credit the increases to a referendum Nevada’s voters passed in 2006. The law pushed the Silver State’s minimum wage for uninsured workers $1 per hour higher than the federal rate, and required Nevada’s base wage to rise every July 1 based on either inflation or any federal wage hike — whichever is higher. The federal minimum rose last summer to $7.25.

Liberals, as you might imagine, are thrilled with this news.

But Jan Gilbert, Northern Nevada coordinator for advocacy group Progressive Leadership Alliance of Nevada, said there’s abundant national research showing that raising the minimum wage doesn’t cost jobs, and such pay increases actually stimulate the broader economy. A 2009 report from the Economic Policy Institute found that boosting the federal minimum wage to $7.25 would generate $5.5 billion in additional consumer spending over a year.

“I think there’s kind of a Chicken Little, ‘sky-is-falling’ reaction,” Gilbert said. “If anything, what an increase really does is increase consumers’ buying power, reduce costly employee turnover, raise productivity, increase consumer satisfaction and improve the reputation of companies. A raise is a benefit to our economy. It’s more money being spent in our economy.”

There’s abundant national research all right, but even liberal researches (who support increasing it) admit that increasing the minimum wage increases unemployment. And teenagers are increasingly feeling the effects of this misguided policy.

But let’s leave that aside and take Gilbert at her word. If raising the minimum wage leads to this host of positive consequences, why don’t we increase it to $100 an hour? or $5000? or $1 million?

This isn’t a hypothetical question. I’m serious.

The answer to this question reveals the fundamental flaw in liberals’ economic way of thinking. Liberals assume that there’s a seemingly endless supply of other people’s money (OPM) or stuff (health care, food, transportation, etc…). (Important caveat here: The only point of money is to be able to purchase things. No one wants pieces of green paper; we want the purchasing power that green paper represents.) If there is a never-ending supply of OPM and there are poor people, it logically follows that rich people are harming the poor, because they have more than their “fair share” of money. Hence it is the government’s job to redistribute wealth through things like the minimum wage and taxes that punish the wealthy.

The logic is sound, except that they are basing their arguments on a faulty premise.

There isn’t an endless supply of other people’s money or stuff. The world, in fact, is defined by scarcity – unlimited human needs and wants in a world with limited resources and time. And if the world is defined by scarcity, we can’t mandate people get paid $100 or $5000 an hour without hyperinflation or record-high unemployment that leads to complete economic collapse.

If there are scarce resources in the world – and there are – you can’t mandate that someone gets something, like a wage, that they can’t earn, because the resources don’t exist. (Another important caveat: You can do this in the short term if you cannibalize savings that have been built up over the years or go into debt. But as the U.S. is seeing right now, that’s not sustainable.) And no amount of government mandates can change this reality.

The minimum wage is just another well-intentioned policy that hurts the people its advocates claim to want to help the most.

Bonus: The Review-Journal drops a great editorial on the minimum wage today.