Author: R. Alan Harrop, Ph.D
Two state Democrat Senators, Joyce Waddell and Rachel Hunt have introduced a bill in the N. C. Senate to increase the minimum wage from $7.25 per hr. to $15.50 per hr. Is this a good idea or not? Let’s take a look.
Historically, the first federal minimum wage was mandated in 1933 by the Roosevelt administration at $.25 per hr. Like many. Roosevelt’s leftist actions it was overturned by the Supreme Court. Subsequent laws approved by Congress established federal minimum wages that have been increasing steadily over the years. Most states, like North Carolina, have implemented their own minimum wage laws. The purpose of a minimum wage has been confusing since some claim that it should reflect the minimum needed to support oneself i.e. a living wage. Critics of a minimum wage usually oppose the concept of as an interference by Big Government in the free enterprise system. There are other issues that need to be recognized that make raising the minimum wage problematic.
First, a minimum wage was never intended as a self-supporting living wage. It was intended for new workers, many of whom lack the skills needed to justify a higher wage. Importantly, a wage level is best seen as a contract between a worker and the employer reflecting the value of the workers skills and output to that business. A business cannot long exist if it is paying more to the worker than they contribute to the productivity of the business. The balance between worker skill and contribution to business success if best left to the business owner not some government law. This is especially true for new and or small businesses that typically operate on a very small profit margin. Large corporations, like Walmart and Amazon can afford to pay higher minimum wages than your neighborhood retailer, manufacturer or repair shop. It is important to recognize that very few workers stay at the minimum wage level as they become more skilled and contribute more to the success of the business. Second, in an era of increasing automation, raising the minimum wage can actually be detrimental to workers in the long run. Self-checkout, automated food ordering, robotic manufacturing are all likely to increase as the minimum wage is increased, producing fewer jobs. This is especially harmful for unskilled beginning workers that do not yet possess useful work skills. Third, North Carolina has been doing very well over the past several years as a good place to conduct a business. While the minimum wage rate is not the only factor, it is one reason why businesses select North Carolina over most other states.
The bottom line is that the wages are best left to the negotiation between worker and employer than to mandates from government. To do otherwise, is a direct threat to small businesses that have traditionally been the main source of employment in this country, especially in rural areas.