Although it is generally known for anyone who can think two steps ahead that price checks have negative consequences, politicians cannot help, but continue to promote price checks as a policy.
With Americans Facing Increased Costs Of Living, There has been a Return to Calling for Minimum Wage Hikes from Democratic Socialists Like New York City Democratic Mayoral Candidate Zohran Mamdani, Who Wants To Raise The Minimum Wage. Josh Hawley, WHO is Bafflingly Pushing An Increase in the Federal Minimum Wage to $ 15/HOR With Additional Increases Indexed to Inflation.
If wages can be increased per mandate without negative consequences, why would we stop there? Why not make the minimum wage $ 100/hour, $ 100,000/hour or even a cool $ 1 million/hour?
Zohran Mamdani, mayor candidate for New York City, speaks during a meeting of the Working Families Party on Foley Square in New York City, 10 May 2025. (Reuters/Bing Guan)
Because in real life that is not the way things work.
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The minimum wage has always been a malignant policy, rooted in racism. It was adopted as legislation exactly to exclude unskilled employees, in particular immigrants, minorities and women, from staff. It has the same effect today.
But the financial illiterate do not seem to understand the basic economy.
The minimum wage is not an average wage, median wage, maximum wage or even an expected wage. It is literally a floor (although, as economist Thomas Sowell has noticed, the real minimum wage is zero). As reported by the US Bureau or Labor Statistics (“BLS”) via Fred, only 1% of employees who are paid on or under the federal minimum wage, and those data are “only based on the hourly wage they report (which does not include overtime hours, tips or committees).”
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Senator Josh Hawley asks questions during a hearing of the Senate Judger on January 15, 2025. (Tom Williams/CQ-Roll Call, Inc via Getty Images)
The minimum wage is strongly hurled into teenagers and employees who enter the workforce with few skills. As the BLS noted: “Minimum wage employees are usually young. Although employees younger than 25 years of age represented a fifth of paid employees per hour, they accounted for 43% of those who paid the federal minimum wage or less.”
While the minimum wage immediately influences a small number of individuals, its effects in the entire economy in general wrinkle. If teenagers and unskilled employees have a guaranteed wage floor, people with skills and experience will want to be compensated even more.
This increases both wages and taxes paid for a company during their workforce, as well as those of all their suppliers, which adds considerably to operating costs and the reduction of what is perhaps already slender operational margins. The companies will either have to earn less money or pass on costs to consumers – or both.
This makes products and services more expensive and in many cases companies throughout the economy will do bankruptcy, because every company now competes in a market where non -disabled employees have a high fixed costs established by the government.
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Sometimes companies will also reduce product sizes or service offers – Krinkflation, as we saw under the latest administration – but somehow flow that increase in labor costs through the economy and influences what you can get for your dollars.
It is remarkable that owners of small companies, who often work well more than 40 hours of the week and risk their own capital, do not get guaranteed wages, but politicians like to make entrepreneurial efforts riskier and more expensive.
The minimum wage, in particular the federal proposals, does not take into account different economic costs per region or geographical areas.
The fact that there is a bad policy does not mean that we must continue to double it. Payment must be negotiated between parties based on value and demand for skills and services.
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An economy cannot function without getting people in the workforce and being trained. We must keep jobs where people can enter the staff, learn skills and, if desired, be able to continue in their career paths.
At a time when AI threatens jobs and replaces technology employees, establish legislation that stimulates fewer jobs and makes it more expensive and difficult to run a company, it is clearly insane.
Wages will naturally shift with the market for labor, as we have seen in recent years. Politicians who try to ‘help’ will again find that intentions are not equal to results, and their policy only makes the costs of living.
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If they want to help in a way that drives positive results, make it cheaper and easier to do business by removing expensive rule barriers and bureaucracy.
That is the path to a thriving economy and better costs of living, not mandatory wages.
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