Why Do Politicians Love Increasing the Minimum Wage?
There is a Reason That No One Seems to Talk About
In the debate over minimum wages, I have long wondered why politicians are so eager to support minimum wage increases. I understand business. An increase in the minimum wage is an increase in cost, which hurts the bottom line. On the other side, I understand labor. Unions and other organizations that represent workers need to fight for more pay and benefits on behalf of those workers.
But why politicians? Why do those who are voted in to represent the voters, which includes both business owners and managers, and workers, so overwhelmingly support increases in minimum wage? Even some politicians who claim to be conservative and on the “right” support minimum wages. It’s always been a mystery to me until I started to do a little math.
A worker in California making $10 an hour, who works 40 hours per week, will get a net paycheck of $348.75. If that worker gets a raise under the minimum wage laws to $15 an hour, and still works 40 hours per week, that worker’s paycheck will rise to $504.43. That’s an increase of $155.68, or about 45%.
What about the government? At $10 per hour, the government will get $112.45 in income and payroll taxes. However, at $15 per hour, the government will get $187.37. That is an increase of $74.92, or about 67%. So, while the worker increases his or her take home pay by 45% the government increases its take by 67%, far outstripping the increase the worker is getting. Simply put, an increase in minimum wage is a massive financial boon to the government.
Remember it’s not just those workers who get bumped to the minimum wage who will be contributing more. Workers up the line will also get increases because the guy who used to make $15 per hour, is now going to want to make $20 per hour, and the guy who used to make $20 an hour will want to make $25 an hour, and so on up the line. The result? Millions of workers and employers pay more in payroll and income taxes creating a financial windfall at every level of government.
In California, where the government has just increased the minimum wages for fast food employees from $15 to $20 per hour, the numbers are similar. The employee will receive a net increase in his or her paycheck of about 30%, while the government’s share of the increase in pay amounts to just short of 50%. Again, given hundreds of thousand of workers who will be getting increases, this increase in the minimum wages represents a huge windfall for the government.
Now I understand why politicians so overwhelmingly seem to support minimum wage increases. The politicians really care little about how much the workers make, and they certainly don’t care about all the workers whose jobs will be lost as employers move to reduce costs, and they certainly understand increasing minimum wages is only a temporary fix (if it were not, you wouldn’t have to continue increasing it).
I always thought the only logical argument for minimum wage is that increasing the minimum wage makes one feel good. But now, through a little math, I’ve really figured out why politicians love the minimum wage. It’s a great way to fill up the governments’ bank accounts and provide more money for those politicians to use buying votes, implementing “feel good” projects that accomplish nothing and wasting taxpayer money on boondoggles. I guess if I were a politician, I’d be supporting minimum wage increases too. Imagine the squawk if the government wanted to increase taxes by 62%. But under the guise of doing what’s “fair” and feels good, that’s exactly what they are doing. And everyone one of them knows it.
Ten Logical Arguments Against Minimum Wages
There are ten logical, rational, and economic reasons why minimum wages are a bad idea.
1) minimum wages limit workers’ personal freedom to sell their labor at the price of their choosing,
2) minimum wages limit business owners’ personal freedom to hire labor at the price they are willing to pay,
3) minimum wages are unfair to people who earn more than the minimum wage,
4) minimum wages cause workers to get laid off,
5) minimum wages increase costs mostly to people who are low income earners,
6) minimum wage increases are temporary fixes and have no long lasting economic effect,
7) minimum wages reduce and eliminate job opportunities for the least skilled in our society,
8) minimum wages are arbitrary
9) Minimum wages ignore the entry level argument and lastly,
10) minimum wages provide for political opportunism in that politicians use the promise of more money to purchase votes from people who don’t really understand the issues.
Note: The calculations of net pay, payroll taxes and income taxes were accurate as of the writing of this article. The amount of income or payroll tax is adjusted by the government from time to time.
Given the accuracy of the arithmetic, the solid cynicism of the rationale is extreme, and unfair to the low income workers who can’t make ends meet at the wages they are able to negotiate on their own. Can it be too much sometime, probably. Done to get re-elected sometime, probably. Is it beneficial to the bottom of the economic ladder, almost always.