Increasing minimum wage will not alleviate poverty; higher pay rate eliminates motivation to work harder

In reading “New minimum wage a step, still not enough,” I would have to disagree with some of the author’s viewpoints. As a higher minimum wage is put into place, many people are calling it a victory in the war on poverty. However, I would contend that if people actually examined the effects of increasing the minimum wage, they clearly would not want to raise it.When we see headlines of an increase of the minimum wage, we tend to think of lower income people boosting their income and helping people get out of poverty. Yes, people receive a higher wage, but that increase is then passed on to the consumer. To offset these increases, companies pass on the costs by either raising prices or by reducing their costs. As a result, if a company doesn’t raise prices or reduce costs, their net income decreases. In the end, the consumer and companies pay a price because of a government mandate. My question is, why should the government mandate the price of labor? Mandating the price of labor is similar to mandating the price of gasoline. Clearly, the minimum wage is just a price-control on labor. The last time I checked, price-controls more often than not fail and lead to market inefficiencies.

Yes, there are income disparities between people, but there is less of a disparity of income in this country compared to other countries. People in poverty in this country still have more opportunities to get out of poverty than people in countries where the economy is centrally planned. In fact, many people came to this country to participate and reap the rewards of a capitalist economy. The countries without capitalist economies have a wider gap between income classes with only two options: the rich and the poor.

I would disagree with “minimum wage is a good starting point.” Minimum wages don’t magically end poverty. If all countries could simply increase their minimum wage to $1,000 per hour wouldn’t people working on minimum wage all be rich? If higher wages could fix poverty, countries could easily end poverty by waiving their legislating wand to enact higher minimum wages. People would get paid very well indeed, but consumers would bear the costs of the extraordinary wage including those who are making minimum wage.

Now you may be thinking, “Don’t you have any decency toward people in poverty?” I would argue the only reason why people are in poverty or poor for that matter is because they don’t produce anything of value. People amass wealth because of their ability to do the most people-pleasing. John D. Rockefeller and Bill Gates were experts at this and in turn satisfied the wants of millions of people. Mandating a minimum wage does not mandate a certain productivity level. If workers are getting paid more for the same amount of work, what is their incentive to work harder? Workers are induced to become lazy and less productive because they are getting paid more to do the same job that they have been doing.

Although an increase in the minimum wage sounds like a good idea, it has more side effects than many people are aware of. If you want to increase the minimum wage, you should also prepare for: higher prices, higher unemployment, lower corporate profits and lower productivity. Upon careful examination, it is clear that these side effects are more than enough to convince people that we don’t need to increase the minimum wage much less have one to begin with.

Peter Parlapiano is a junior finance major from Houston.