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Lower The Minimum Wage: Opinion

Stocks in this article: MCD WMT

Proponents usually offer two main reasons why the working poor will be better off if the government decides for them what they should receive for wages.

The first reason is that you can't raise a family on minimum wage. After adding in all the government programs available, I'm not sure that argument holds water, but let's assume it's true for a moment.

Nader's argument assumes that everyone including an entry-level position at McDonald's (MCD) and Wal-Mart (WMT) should be able to earn enough to raise a family right from the start. Never mind a lack of skills or work history, in his mind if you're punched in on the clock, you should be able to start a family. The price consequences for consumers should be obvious.

The second argument is that wages should be set at an arbitrary "dignified" level. Again, this type of argument skirts around logic and tries to create an emotional reaction. From a government point of view, there should be nothing dignified or undignified about any wage amount. Someone is worth whatever someone else is willing to pay. Proponents forget that having a job, learning new skills, and self-improving are more dignified than the unemployment line.

What proponents actually need is Santa to be real. The only problem is that Santa isn't true, and there is no such thing as a free lunch. I think if we can work around the lack of Santa and free lunches, the minimum wage plan may have merits.

As long as we live in a world that doesn't include free lunches, the reality of a minimum wage is zero benefit for those earning it, and a negative benefit for everyone else. This isn't a zero sum game, and the amount of wealth available isn't static, it's dynamic. The history of central planning destroying wealth never seems to both those that advocate for it. They continue to focus on positive indications of success.

Nader points to a poll about Chicago and the raising of the minimum wage there. According to the study, a dollar increase in the minimum wage results in $2,800 of additional consumer spending. What Nader fails to point out is higher prices as a consequence for the increase in the minimum wage. Santa doesn't bring the extra $2,800 per year; consumers have to pay above market rates for the items they buy to make it happen.

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