WAGES: Beware what can happen

It’s too bad that proponents of raising the minimum wage don’t seem to understand that the result of their efforts will only result in more unemployment.

Wages are prices and are subject to the “law of supply and demand.” This simply means that if prices are increased for labor, less labor will be demanded and fewer jobs will be created. Raising the minimum wage also results in the problem of “unintended consequences.” Yes, some workers will benefit from a higher wage, but many other people who otherwise would have had a job are left without one. The person with the higher wage is seen, but the many without jobs are not observed or recognized.

Minimum wage workers oftentimes are young high school or college students who want part-time jobs to supplement their incomes and to learn job skills. Many of these jobs, which serve as a training ground for better future positions, will no longer be available if the cost of providing them is too high for employers.

Many small business people struggle to earn enough to stay in business. These marginal employers will likely be forced to close their businesses and lay off their employees if they have to increase wages. The result of this will be former employees who will have to search for a job in a dismal economic environment that has fewer jobs to offer than before. The former owner will likely have to join them in a job search himself.

The business world is competitive. Businesses compete with other businesses for employees and must pay a wage that is high enough to obtain workers. If the business does not pay a competitive wage, the prospective employees will work somewhere else. Businesses do not set these wage rates, the marketplace does. As employees improve their skills and value to the employer, their wages will either increase or they will use their skills to get better jobs elsewhere. Skilled workers are always in demand and employers benefit from keeping workers that they’ve trained by increasing their pay. This is the law of the marketplace.

The result of an increased minimum wage will be more closed businesses, higher prices to consumers (who perhaps will make more purchases online or eat at home instead of in a restaurant), fewer job opportunities for people seeking part time or first-time jobs, and a reduction in economic activity in the area.

JOHN J. KEARNS

Coeur d’Alene