No Minimum Wage Hike! by Benjamin Seevers (7/3/2023)

The PA House passed H.B. 1500, a bill which would raise the state minimum wage to $15/hour by 2026 with provisions for further increases to match inflation.  Armstrong County's State Senator and also Senate Majority leader, Joe Pittman, stated that the $15/hour figure was too high; however, there is potential for finding a "middle ground." In a series of letters to the editor (Leader Times, PennLive, and Indiana Gazette), I examined why the minimum wage should not be increased under any circumstance, but I think these points need to be reiterated here. 

The minimum wage will either be ineffective or effective. If ineffective, it will not cause any problems because it will be below the market wage of every labor market. Since there are many jobs that pay the current minimum of $7.25/hour, any minimum wage increase is guaranteed to be harmful. 

An effective minimum wage can show its nasty effects in a variety of ways. First of all, there is the common argument that minimum wages cause simple unemployment. In other words, people will lose their jobs. However, this happens often, but is not necessarily the case. Unemployment can take on other forms.

For instance, when labor is demanded by an employer, they aren't simply demanding "labor" in general. They are demanding specific quantities of labor. Employers are demanding hours of labor, so unemployment can take the form of decreased hours rather than decreased total jobs. 

Furthermore, wages are not the only means of compensation. Employees can be paid in a variety of non-monetary and monetary ways. For example, working conditions are a form of compensation, and improved working conditions are correlated with a lower wage. This is the phenomenon of compensating differentials; when working conditions are more dangerous, higher compensation is needed to obtain labor. Likewise, if conditions are improved, compensation decreases. When the minimum wage is instituted, employers who originally paid below the minimum wage may decrease working conditions to bring the market wage into alignment with the new minimum wage. 

Furthermore, employers may cut other forms of monetary compensation in order to hold total compensation equal. 

Progressives may advocate passing laws to require that other forms of compensation remain untouched or that working conditions remain the same, but doing so will only make the other pernicious effects of the minimum wage take hold. Regulating these other effects will cause unemployment. 

Additionally, the minimum wage will increase costs of production as well, leading to a higher price and a decrease in final consumer goods. 

Ultimately, employers, employees, and consumers are harmed. 

The beneficiaries are cronyist businesses who want to price their competitors out of the market and laborers who are lucky enough to get a job. Politicians benefit as well. They exploit the economic ignorance of the public for political gain. 

Don't be fooled. The minimum wage is undoubtedly bad. Anyone is welcome to challenge me on this point. Let's hope the legislature does not raise the minimum wage whatsoever. Unfortunately, budget negotiations are coming up. The Republicans may strike a deal with the Democrats, but whatever they get out of these budget negotiations is unlikely to be worth it. I don't have faith that the state Republicans have their priorities in the right place.  We can call our State Senators and Representatives, but in the end all we can do is cross our fingers and hope for the best. 

If the State Republicans pass an increase, we won't let the public forget it.