A Minimum Wage Increase Will Not End Poverty

Feb 21, 2008

I want so much for our society to eliminate poverty. I believe we can, and I hope we will soon. However, I do not think increasing the minimum wage will significantly help end poverty. I have a few reasons for this.

Generally, I see governments and politicians as inherently dishonest. They pander to people with nice sounding proposals such as minimum wages. But I do not think a minimum wage will end poverty, and I doubt many politicians truly think it will. They just use it as a way to get votes, just like Bush used gay marriage and the war on terror. The minimum wage will not end poverty in the same way the war in Iraq will not reduce global terrorism.

But an increased minimum wage will increase government control over economics and society, which has almost always proved detrimental in the long run. When two adults make a consensual agreement, it almost always works better to let them do it than to interfere. That generally applies to anything from employment to sex. When the government forcefully gets involved in consensual agreements, it only causes needless problems in an otherwise voluntary deal.

I think you know the minimum wage will not work, if you really ask yourself to study it. Imagine if the government increased the minimum wage to $100 an hour; do you think that would end poverty? Obviously, it would not. Imagine if the government increased the minimum wage to $1,000 an hour; do you think that would make us all rich? Obviously, it would not. But it would cause massive economic problems resulting from the governmental intervention.

When humans live in a relatively free society, they voluntarily enter into relationships and interactions that they believe will benefit them. They make countless mutually beneficial deals with each other based on their differing needs and desires. From those interactions develops a complex social system.

Even if it did have good intentions, a government will disrupt the social system by forcefully interfering with the coercive power of law. In analogy, when humans try to make interferences with natural ecosystems, they almost always cause massive damage to the ecosystem by disrupting the natural balance.

Governmental solutions almost always cause way more problems than they solve. But let’s look at the topic at hand. I will explain some of the most apparent and major effects of an increased minimum wage.

Increasing the minimum wage will cause needless inflation. The costs of production will increase for goods and services because the cost of basic labor will be artificially increased by the government’s intervention. The increased price of products will mean money buys less. This will effectively cause a decrease in the salary of workers who earn above the minimum wage–who tend to contribute to the economy more. That will lead to many other economic disruptions and problems. Besides, the inflation will likely negate the minimum wage increase.

Increasing the minimum wage will reduce the incentive for workers to gain skills and to work hard. We may have an unfair economy already, but increasing the minimum wage will only make it more unfair. On average, people in the working class get paid based on how many skills they have, how much education and credentials they have, how hard and well they work, and how many hours they work. Someone who gets paid the minimum wage or a low amount most often provides much less than someone who gets paid a little more. For example, a hard-working doctor gets paid more than a slacking, part-time nurse. This creates an incentive for workers to get an education, to learn valuable skills, to work hard, to get promoted, and pull their weight–which we need people to do for them to gain self-sufficiency and for society to end poverty. Increasing the minimum wage gives money to the workers who least deserve it. For example, an increased minimum wage will give a raise to the guy who went to school less, who didn’t study as hard, who doesn’t work as hard, and who chose to take the easier and less important job; and that raise could have gone to the guy who worked much harder and earns a few bucks more than the minimum wage.

Increasing the minimum wage will increase unemployment. If the government disallows employers from hiring employees who will take the job for a low wage, then many employers will not hire the person for a higher pay. This means the person, who wanted the job at the low pay, may not have a job at all. Many employers cannot afford to pay their low-skilled workers more money. The employers will have to hire less people since they have to pay each person more. Besides, if the employers can pay more and think it is worth paying more, then they will hire better-skilled workers anyway, and that will still leave the low-skilled, minimum-wage worker out of a job.

Increasing the minimum wage only attempts to fix a symptom, not the root problem. The working class generally gets underpaid, and we cannot end poverty until all people can earn a living wage. But merely increasing the minimum wage is a foolish, superficial, ineffective, and possibly counter-productive way to try to ensure all people earn a living wage. We have to ask ourselves, why do some people get paid so little? We have to find the root cause of the problem.

When we search for the root problem, we can see that the fact that some workers get paid so little is part of an overarching problem, which I can best sum up in the following two sentences: Firstly, the working class gets underpaid and overworked because the ruling class leeches off the labor of the working class. Secondly, society does not enable everyone to get an education and to start a business or find a job with an income above the cost of living.

We need to find a way to ensure that children grow up in an environment conducive to success. We need to make sure they get quality education. That requires that the students have sufficient food, clothes, shelter, and healthcare while they grow up and get their education because a person cannot learn properly while hungry, naked, homeless, or sick. In the same way, we need to make sure poor people have a way to get education and job-training, so that they too can gain the skills and credentials required to earn a living wage. If we do that, then we can actually have a society in which people earn a living wage without the need for a minimum wage.

In summary, the use of the coercive force of government to artificially raise the pay for low-skilled and uneducated workers will not solve the underlying problems that cause people to earn such low-wages and will itself cause problems. Instead, society must instead raise children properly and ensure that all people have access to education and job training so that they can get the skills and credentials to naturally earn a living wage and support themselves and their families.

What do you think? Post your comments on what I have written and your own ideas about minimum wages in this thread at the World Hunger and Forums. All viewpoints are welcome.

Update (March, 2010): I do want to make it clear that I am not necessarily proposing the minimum wage be decreased or eliminated immediately. Rather, I want us to solve the underlying problems to eradicate poverty which a minimum wage increase cannot do alone. I want to create a fair, povertyless society in which a minimum wage and government intervention is not needed. For the time being, keeping the minimum wage and even increasing the minimum wage in any given state or country may be a helpful temporary band-aid fix while we fix the underlying problems. The point of this blog post has always been to advise anti-poverty advocates to not look at the minimum wage as a solution in itself but rather look at it as the painkillers with some harmful side-effects that a surgeon gives you before or while he solves the actual fundamental problem.

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Children suffering from Poverty