President Obama’s plan that would increase the federal minimum wage to $9 an hour would not only reduce the availability of jobs (especially in the minority population, Obama’s biggest support group), but it would prevent the freedom of workers to work jobs for less than the minimum wage even if both parties agree to the lower wage, wrote the Cato Institute’s James Dorn in an article published in U.S. News and World Report.
“If the prevailing market wage for low-skilled workers is $7.25 per hour and Congress mandates a minimum of $9 per hour, then workers who produce less than that will not be retained or hired,” he wrote. In other words, basic economics. As the government increases the minimum wage, businesses are necessarily forced to make a decision: reduce their workforce or increase prices. Which would you prefer?
Both, of course, have negative consequences for our nation. If businesses reduce their workforce, workers who previously had jobs will probably seek unemployment benefits, costing the American taxpayer money. If companies increase prices, consumers will naturally spend less which, in turn, effects the cash flow of American businesses and may necessitate further layoffs and curtail innovation. The minimum wage death spiral gets strengthened.
“The best way to stimulate the economy and create jobs is to increase economic growth by expanding free markets, not by increasing government power through a higher minimum wage.”