Ancient Greek mythology tells the story of the Sirens. These creatures stood on a rock in the middle of the sea, singing beautiful songs.
Passing sailors, overwhelmed by desire upon hearing the songs, would plunge into the ocean and drown in the vain hope of reaching the Sirens.
This story has been a common theme throughout history. It is often used as an allegory whenever people get swept up by emotion and lose touch with reality.
The most recent iteration of the Siren story is the Left’s minimum wage hiking spree.
Wanting to give free money to everyone, liberals have been pushing for an increasingly high minimum wage. In many places, liberals even want to raise the minimum wage to $15 per hour.
It should not take an economist to explain why this does not help anyone. Unnaturally high wages always hurt small businesses and consumers alike by raising prices and forcing stores to close.
Recent studies further explain this phenomenon:
From The Daily Wire:
A new Harvard Business School study found that minimum wage hikes lead to closures of small businesses. “We find suggestive evidence that an increase in the minimum wage leads to an overall increase in the rate of exit,” the researchers conclude.
The study, titled Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit, looks at “the impact of the minimum wage on restaurant closures using data from the San Francisco Bay Area” from 2008-2016.
The Lucas found that lower-quality restaurants (indicated by Yelp scores) were disproportionately affected by wage hikes, increasing their likelihood of closure relative to higher-quality, established restaurants.
“The evidence suggests that higher minimum wages increase overall exit rates for restaurants. However, lower quality restaurants, which are already closer to the margin of exit, are disproportionately impacted by increases to the minimum wage,” says the study.
“Our point estimates suggest that a one dollar increase in the minimum wage leads to a 14 percent increase in the likelihood of exit for a 3.5-star restaurant (which is the median rating), but has no discernible impact for a 5-star restaurant (on a 1 to 5 star scale).”
While “firm exit” was the focus of the study, the researchers also noted that there are often other consequences from wage hikes, such as worker layoffs, increased pricing and hour-cuts for existing workers.
The conclusion here is that minimum wage increases hurt the vast majority of businesses.
Since not every restaurant can be rated 5-stars, many have been forced to close. This is not because those were bad restaurants – all it means is that those businesses were not popular enough to offset increased food prices and fewer employees.
Here in America, the free market should decide which businesses grow and which businesses fail. If a restaurant has bad food and poor service, it will die out on its own. That is how capitalism works.
Liberals, on the other hand, think the government gets to decide which businesses are worth keeping around. By instituting an astronomically high minimum wage, liberals ensure that only well-established businesses can survive.
I ask: how does this help anybody?
While it is true that some workers take home more money with a higher minimum wage, far too many more end up losing their jobs when businesses are forced to downsize or close.
Furthermore, even though they may get more money, they also need to spend more of that money once prices rise to reflect the wage hike.
Higher wages are only effective when the market creates them on its own. Whenever the government sets an artificial wage line, the economy begins to experience negative effects.
If we want to provide a better economic future for the next generation, we need to return to free market principles. Just ask the people of Venezuela: children cannot thrive if they grow up in a socialist country.
The American people must resist the Siren call of minimum wage hikes. Otherwise, our entire economy will drown itself in a sea of false promises and failed policies.
Source: The Daily Wire