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Why Hiking the Minimum Wage is Bad for Everyone

Updated: Apr 13

This week, state Representative Butch Wilkins introduced a bill to increase the government-mandated minimum wage from $6.25 to $8.25 per hour — an increase of 32%. Raising the minimum wage is one of those ideas that sounds great as long as you don’t think about it very much. Perhaps the most immediate consequence for Arkansans will be the artificial spike in prices on consumer goods. How many of you would like to pay 32% more for your meals?

But of course you won’t pay exactly 32% more for your meals because businesses will find ways to cope with these costs in order to provide food. They can’t just raise the price of a Whopper meal from $6 to $8 — the market won’t sustain such a high price. So what will businesses do?

As this great video from LearnLiberty explains, minimum wage laws don’t force businesses to pay minimum wage to all of their employees — it forces them to pay minimum wage to the employees they keep. Employers will pay exactly $0 to the employees they are forced to lay off and $0 to employees that they cannot afford to hire. In addition, the resulting layoffs will require remaining workers to take on a heavier workload. The result: fewer jobs and heavier burdens on businesses.

Michael Pakko, one of Arkansas’s finest economists, adds that the minimum wage is an inefficient and ineffective way to truly help the poor:

When we raise the minimum wage, it’s not necessarily an efficient, targeted way to help the working poor, which is who we really want to help in this circumstance. There are more direct ways to benefit that segment of society. So, it’s not a very sharp instrument. It’s not a very useful tool for really addressing the problem to help the working poor find a better way of life. And, as I mentioned, the drawback makes it more difficult for younger, inexperienced workers to get their foot in the door.

Ideally, we’d all base our political views on evidence and argument, without getting swept up by the urge to collapse into pure emotionalism. State lawmakers must resist that urge and have the courage to make decisions that will truly benefit the poor. While it may make lawmakers feel better in the short term, heaping increasing costs on employers and consumers will not solve our economic problems in the long term. Hiking the minimum wage will contract jobs and expand poverty, leaving more Arkansans dependent upon the state for sustenance.

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