It’s June in Harrisburg, and that means that the Capitol is teeming with lobbyists trying to convince lawmakers to spend someone else’s money on their client’s causes. Sometimes that takes the form of subsidies like the nuclear power bailout, or the $250 million Race Horse Development Fund. However, bad ideas are not limited to spending tax dollars. One popular, and harmful policy, that continues to pop-up while lawmakers look for horses to trade is an increase in the minimum wage.
A recent article from the Associated Press notes that Republicans in the General Assembly have until now rebuffed efforts to increase the minimum wage. According to the article, there is now some movement among Republicans in the Senate to raise the minimum wage:
“In that chamber, Labor and Industry Committee Chairwoman Camera Bartolotta, R-Washington, is preparing legislation to boost the minimum wage by a ‘cost-of-living increase,’ which she said would protect business owners from crushing new costs.
“She declined to give details.
“Senate Majority Policy Committee Chairman David Argall, R-Schuylkill, said he also supports some sort of minimum-wage increase and that Senate Republicans have discussed the idea of tying an increase to policies to get more people into the workforce and off public assistance programs.”
Lawmakers who advocate increasing the minimum wage are no doubt well-intentioned, but there are always unconsidered, or unintended consequences to their interference in the labor market. One item that is rarely discussed in debates on minimum wage is the simple fact that government-mandated wages, by their nature, interfere with an individual’s freedom of contract. Freedom of contract is a person’s right to bargain and create an agreement without interference. When the government sets a minimum wage, that freedom is diminished.
A second problem with increasing the minimum wage is more practical; it harms the people that the policy change purports to help. The Independent Fiscal Office estimated that raising the minimum wage to $12.00/hour would destroy 33,000 jobs in Pennsylvania. Their report may underestimate the impact substantially. Ontario, Canada increased their minimum wage by 20 percent from 2017 to 2018, and there was a nearly immediate elimination of over 59,000 part-time jobs. Most of the wage proposals being floated would surpass Ontario’s wage increase on a percentage basis.
The real minimum wage is zero. When politicians forget that and try to set wages, they may feel good about themselves, but workers pay the price in lost jobs and decreased hours.