Today, let’s consider one of the many bad policies that were endorsed by Democratic Presidential Nominee Joe Biden and his running mate, Sen. Kamala Harris (D-CA), at last week’s Democratic convention: raising the country’s minimum wage.
The Democrats last Thursday claimed that raising the minimum wage will help America’s low-income worker, significantly reducing his poverty, but as a recent Associated Press fact check demonstrates, this is simply not true.
Raising the minimum wage to $15 an hour is something that has been pushed by Democrats in recent years. Many states, in fact, are already taking steps to make this happen. But, here, let’s confine ourselves to Biden’s plan, the “plan for strengthening worker organizing, collective bargaining, and unions.”
Biden claims that “employers steal about $15 billion a year from working people just by paying workers less than the minimum wage,” and he wants to fix this.
Thus, in one section of this plan, in which Biden promises to “ensure that all workers are treated with dignity and receive the pay, benefits, and workplace protections they deserve,” Biden states that he, as president, will increase the federal minimum wage to $15 an hour, allowing “workers to earn their fair share.”
Biden “firmly believes all Americans are owed a raise, and it’s well past time we increase the federal minimum wage to $15 across the country,” the plan reads.
Here’s why it won’t work:
The inevitable result of an increase in the minimum wage will be more unemployment because employers are simply not going to hire people at this higher rate of $15.
The Nobel Prize-winning economist Milton Friedman used to make this point all the time back when the minimum wage first became a thing. He would say that the government, with the minimum wage, in effect legislates that it is better for someone to be unemployed at $15 an hour (since employers are not going hire him) than employed at the lower market rate.
A 2019 report by the nonpartisan Congressional Budget Office, which was cited by the AP fact-checker, demonstrates this. It found that 1.3 million people would lose their jobs as the direct result of raising the minimum wage to $15. It further found that the raise would only benefit a small percentage of those in poverty.
Perhaps, it is for these reasons that Biden, in his plan, only refers to “all workers” and Sen. Cory Booker (D-NJ) says, “we’ll raise the minimum wage so no one who works a full-time job lives in poverty.” Sure, “no one who works a full-time job” will live in poverty making the new $15 minimum wage, but what about all of those people who just lost their full-time jobs because of that increase? And, what about all of those who can’t get a job because an employer won’t hire them at $15 an hour?
It ought to be acknowledged that it is extremely hard to argue against the kind of rhetoric used in Biden’s plan. The idea that the big, bad employer is stealing from the low-income worker, the idea of workers earning their fair share, the idea that Americans are owed a raise, what worker wouldn’t get on board with these ideas? Biden’s plan will get votes simply for this reason.
As Republicans, however, it is our responsibility as realists to give plans like Biden’s a reality check, even at the risk of being labeled a killjoy. And, here, the reality is that Biden’s plan will not accomplish what it sets out to accomplish because that is simply not how economics works. You decide what’s better this November: being unemployed or being employed at less than $15 an hour.