Increasing minimum wage won't reduce poverty

Published: February 24, 2013
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Every complex problem has a solution that's simple, direct, easily articulated — and wrong. An excellent example is the mistaken idea that increasing the minimum wage will reduce poverty. A higher minimum wage might actually increase poverty. I'm confident that it doesn't reduce poverty.

Proponents talk about how hard and how long people work. Hard work alone doesn't generate the money needed to pay wages. If I dig and refill a hole in my backyard, I would work hard but not create value and not earn money to pay myself a wage. We never hear “worth of the work.” Each job has a value. If an employer is forced to pay more than that value — more than the job is worth — the job will disappear; maybe not this week or this month, but it is certainly doomed. The person holding that job must either get another job with higher worth or be unemployed.

Education, job training and “moving on up” are the ways to reduce poverty. It may not be the primary factor, but increasing the minimum wage adds pressure to monetary inflation. Of course, inflation is yet another way to transfer buying power from lenders to debtors. I hope that politicians proposing to increase the minimum wage are cynically pandering for votes and transferring wealth to debtors. Otherwise, they're seriously naive and don't understand that wealth is generated by production of value, not by government decree.

John H. Waller, Norman