Hiking the Federal Minimum Wage…is a BAD Idea: A “Hot Topic” Issue Among All Americans Today

This is by far one of my favorite “hot topic” issues occurring in the United States right now: hiking the federal minimum wage from $7.25 to $15.00.  Let’s not waste time and start from the beginning.

What is the Federal Minimum Wage?

The federal minimum wage is contained under the Fair Labor Standards Act (or the FLSA for those of you who like acronyms). If you would like to read more on how the FLSA was created, here is the link to the Department of Labor’s website explaining it’s creation – http://www.dol.gov/dol/aboutdol/history/flsa1938.htm. If not, continue reading. The FLSA is subsidized by the Fair Minimum Wage Act (sorry, no need for acronym here) which phases in an increase to the standard federal minimum wage set in the FLSA.  The Fair Minimum Wage Act, signed into law by President George W. Bush, was created as an addition (or a “rider”) onto the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, & Iraq Accountability Appropriations Act of 2007.  This act implemented three increases in specific years through the year of 2009. Here is a chart taken from the Department of Labor as to how the increase has gone in the past few years:

Prior to 7/24/2007: $5.15

7/24/2007 to 7/23/2008: $5.85

7/24/2008 to 7/23/2009: $6.55

7/24/2009 to Present Day: $7.25

There are numerous exceptions to this law, including state minimum wage laws that superseded the hourly wage above if higher than the federal minimum wage. Those exceptions, however, are not of importance in this blog post.  It is important to remember that each year the federal minimum wage increased by $.70 each year in between 2007 to 2009.  If this increase were to continue up until today’s time, the federal minimum wage would currently be $10.05 (7/24/2013 to 7/24/2014).

Political Campaign Leverage – Is it the Elephant in the Room?

All math set aside, raising the federal minimum wage has been a large part of both the Democrat and Republican future political campaigns. Democrats are pushing for a larger wage in order to make amends for the backfire that happened with Obamacare (don’t worry, I will cover that one day when I can figure out what the hell these idiots passed; Nancy Pelosi still has no clue).  Republicans are skeptical of raising the minimum wage because it has a cause-and-effect reaction by the businesses to either (a) fire a number of employees to make up for that amount expended, or (b) raise the prices of products and charge the consumer with the increase in the federal minimum wage standards.  Either way, this is not going to be a pretty political campaign for either side.  The Democrats will probably never get past the healthcare issues to move onto this topic and, even if they did, their reasoning behind increasing wages is useless. The Republicans will look like jackasses trying to defend why the federal minimum wage shouldn’t be increased for the other 99%. So, who’s right? If you do your own research and educate yourself, you will come to a conclusion. Your conclusion might differ from mine, which I will set out below. If so, I would love to hear your take on the federal minimum wage and why it SHOULD be increased.  However, here is why I believe it should not be increased for now.

Why the US Government Should NOT Increase the Federal Minimum Wage

(1) The retail and fast food industry were not meant to provide longstanding jobs for the American people. These jobs are not meant to be careers. These jobs are for 16-year-olds wanting to support their movie and shopping habits. These jobs are not for 25-year-olds with 4 kids, a mortgage, and an SUV. This is just not the job for you. There are other options out there to support these expenses. You did not choose to do so and the government should not have to pick up your slack. Hurtful as it may be, someone had to say it. Additionally, the government’s increase of the federal minimum wage is keeping the man down.  The government is saying “You will never do better, you can never dream bigger.” You will always be what you never truly wanted to be. Congratulations.

(2) There are other more deserving industries that should be eligible for a pay raise. By raising the federal minimum wage, the government is essentially taking away the minimal, yet larger, amount of money that other industry’s employees are making.  Some industries, such as paralegals, nurses, etc., that have to provide certification to work will be making less than the everyday retail and fast food worker. Let me repeat: the certified workers that provide vital healthcare and legal document work will be making LESS money than those that flip burgers and stock shelves. If that doesn’t peak your interest and change your mind I don’t know what will.

(3) Increasing the federal minimum wage will decrease the amount of help those get from necessary government benefits.  You might think that this sounds great. Keep reading.  Government assistance for housing, food and healthcare would be reduced overall if the federal minimum wage increased, and would result in a significant benefit taxpayers and states’ budgets.  I love this statement and it sounds wonderful for the Democratic party’s campaign – look for it in 2014. I don’t particularly like that the people are using these benefits and a significant tax break sounds wonderful. However, I would rather these workers use the government benefits now rather than accompanied with unemployment benefits.  Big businesses have already cited that an increase of almost double the federal minimum wage (or even anything over $10.00/hour) would result in decreasing jobs across the board.  Unemployment will rise and with unemployment comes a number of other necessary government benefits.  This will be an extremely large tax burden resting in the taxpayers’ pockets.

(4) Raising the federal minimum wage kills jobs. Raising the minimum wage kills jobs for the younger generation and for those that are not as skilled in a certain area. Most employers are not going to be willing to hire those from either of those categories because it will be too expensive a task to train the employee. Like you read in my first blog post (wishful thinking), I am currently an unemployed attorney. I do not have a position because I am either overqualified for certain positions because of my Masters of Law in Taxation or underqualified for other positions in my tax field because I do not have enough experience. I know the feeling of not being “skilled” in a certain area. Most firms are not willing to train someone like me let alone take me in as a new hire. Most firms want lateral attorneys that know the bulk of what they are doing. Either way, I am willing to bet more than 75% of college graduates have been through or are going through this today. It is already happening, and it will get worse if the government raises the federal minimum wage. The result will be drastic.  Taking away jobs from the younger generation and the not-so skilled workers will result in a massive caving in of what is left of the middle class.

(5) And finally, raising the federal minimum wage kills jobs. This reason is SO CRUCIAL that I stated it twice. The higher the federal minimum wage, the higher the unemployment rate. Increasing the federal minimum wage by almost double will increase the big businesses’ expenses by just as much. Increasing business expenses will result in decreasing the employees of the company.  If the government increases the federal minimum wage, the business will resort to finding ways to use less employees in order to maintain their budget. So, here is the information I believe to be true in the end:

Increase federal minimum wage –> Increase business expenses

Increase business expenses –> Decrease employees of company

Decrease employees of company –> Higher unemployment rate

What the US Government SHOULD Do instead of Increasing the Federal Minimum Wage

The US Government SHOULD focus on job creation. The job market is ugly. Work on creating jobs and prepare to be amazed at what our country’s citizens can do with a paycheck.

***Sorry for this post being a day late… I was busy celebrating my NFC North Championship win with the Green Bay Packers (Go Pack Go)! Leave me a comment if you even make it to the end of this blog post. Thanks!

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