Why Minimum Wage Laws Should Be killed – Part 2

This is really more of an update to my minimum wage law post than a part 2. I want to thank everyone for weighing in with their views. It was extremely refreshing to see that most agree with me than disagree. What I want to do with this post is touch on two other issues about minimum wage in general.

The Minimum Wage Is Not a Working Wage

Advocates of minimum wage laws always say the minimum wage should be increased to bring up the living standards of low income families. When the NDP was in power they tried to raised the minimum wage to $10 an hour from $6. I always wonder how they came up with $10 an hour. Why not $15 an hour, or $20 an hour? You want to give everyone a nice standard of living, right? Let’s raise the minimum wage to $40 an hour! I think we all know why this won’t work. BC’s current minimum wage is $8 an hour. If you weren’t making it at $6 an hour, chances are you’re not going to be making it at $8 an hour. The minimum wage was never meant to be a working wage.

Most minimum wage earners are young people. Seventy percent are between the ages of 16 to 23 and 78% live at home with their parents (source: Stats Canada). This was my situation when I was making minimum wage. My first job was at MacDonald’s. I lasted four hours before I quit. I concluded there was no way anyone can live on minimum wage but I didn’t bother looking for a higher paying job. Why? Because I was 15 years old, lived at home for free and didn’t have to live on minimum wage. As a matter of fact, I didn’t have to live on any wage!

Most Minimum Wage Workers Are Not Poor

One of the biggest misconception is thinking minimum wage workers are poor. Most low-paid workers are not from low-income families. The majority are from middle class families – the husband and wife have good paying jobs and their kids make minimum wage working at MacDonald’s (unless they quit in four hours). That is the typical minimum wage worker. Any increases in the minimum wage are unlikely to trickle down to low-income households.

The benefits of a higher minimum wage accrue largely to teenagers living in relatively affluent households. For most minimum wage earners, a higher minimum wage means they can spend more on cloths instead of putting more food on the table. Furthermore, to the extent that higher minimum wages raise the price of goods that poorer families tend to consume, increases in the minimum wage have a perverse impact on the distribution of real income across households.

As a society, we need to do our part to help poor and low-income families. However, higher minimum wages are unlikely to raise the incomes of the poor. Rather, they are likely to reduce employment opportunities for the unskilled and raise the income of certain low-wage workers who do not necessarily come from low-income families.