Initiative 1433 is an attempt to raise the Washington State minimum wage to $13.50 an hour by the year 2020. Raising the minimum wage is often an appealing idea to people, especially those who believe that every person, regardless of their work, is entitled to a “living wage.”
Unfortunately though, these sometimes well-intended attempts frequently harm the people they are intended to help support, savagely backfiring and resulting in higher unemployment and lost opportunity. Too often, proponents ignore the impact on young, historically disadvantaged workers, creating a cycle of state dependency and poverty.
We’ll look at why this is the case, but first let’s look at an important concept about wealth and poverty.
The Wrong Premise
Efforts to increase the minimum wage are based on a misguided idea that we can simply pass a law to abolish poverty. Minimum wage laws try to do this by mandating that people get paid more, forcing the employer to foot the bill.
If this worked, then poorer countries like Haiti, Vietnam or Ecuador should just raise the minimum wage, right? Problem solved!
So why doesn’t this work?
The problem is that the value of a country’s economy isn’t measured by how much people get paid, or even how much they can afford to spend. It’s measured by how efficiently it can produce things of value that people need. If businesses are doing well, selling lots of goods, and making a profit, employees will do well also. In fact, poor countries generally suffer from too much government intervention, not a lack thereof.
This leads to another very important concept:
This is why the minimum wage disproportionately harms young, disadvantaged workers. Employers are forced to retain only the most experienced, highest performing workers, because the cost of anything less than excellence is just too high. Even if a young person is willing to work for, say, $8 an hour, the minimum wage makes it illegal for him to be employed and learn valuable skills.
Somewhere along the road, we decided as a culture that the purpose of work is to simply get paid – not to produce something of value.
The truth is: The best way to lift people up from poverty is to get them experience so they will be more attractive candidates for higher paying jobs. The employment life cycle is like a ladder. Raising the minimum wage removes the bottom rungs and locks out millions of young people who simply don’t have the experience and skills to reach a higher rung, earlier on.
Mandatory Paid Sick Leave
Additionally, Initiative 1433 requires that all employers provide paid sick leave for employees, without any type of exemptions and no limit on the number of sick hours that could be used in a year. Unfortunately, all of these provisions make Washington a less attractive place for businesses, encouraging companies to headquarter in other states. This also increases the cost of retaining existing employees and makes it less likely that business will hire new employees – especially combined with a higher minimum wage. All of these things make Washington less competitive, something we simply can’t afford.
Feel Good Policy
One of the greatest tragedies of human nature is that people will often ignore the consequences of their actions, as long as it makes them feel good. This happens all the time with policies like the minimum wage, which are packaged and sold under the guise of compassion and fairness.
In truth, the least compassionate thing you could do to a young person is to lock them out of the job market by making it harder to hire them. It’s time for the most at risk in our society to stand up and demand reforms that actually help eliminate poverty – not encourage it. Initiative 1433 will do just the opposite.