2013 General AssemblyArkansas LegislatureEconomic Policy

Raising the Minimum Wage: Unfair to Working Students And Still a Bad Idea

moneyThe House Public Health Committee is slated to take up Rep. Butch Wilkins’s minimum wage hike tomorrow morning. The proposal would raise the state’s minimum wage from $6.25 to $8.25 — unless you’re a full-time student who works less than 20 hours a week. Under current law, these students are only entitled to 85% of minimum wage — Rep. Wilkins’s bill would cut that percentage by 20 points, down to 65%. What would the real effect be for working full-time students?

Let’s do some ‘rithmetic:

Currently, the minimum wage in Arkansas is $6.25. Full-time students that work less than 20 hours a week during the school year are only entitled to be paid 85% of that, or $5.31 per hour.

Under the new law, minimum wage would increase to $8.25, but the amount working full-time students earn would decrease by 20%, leaving them entitled to $5.36 — a net increase of only 5 cents per hour.

Working students aren’t getting the same deal as everyone else here, and this raises a big question: If minimum wage increases are such a good idea, why shouldn’t working full-time college students experience the full benefits? Aren’t they entitled to the same “living wage” as other Arkansans?

Don’t get me wrong: I think raising the minimum wage is horrendous economic policy that will only hurt low-skilled laborers and leave fewer Arkansans employed. But why are students being singled out? Is it simply because they do not have a powerful lobby at the capitol? Or could the explanation be much simpler?

The bill doesn’t explain why there’s an exemption for students, but its silence on this question is eloquent. In fact, its silence looks like an admission that mandating artificially higher wages is not a good idea — if it were, surely lawmakers would try to extend the benefits to college students and the businesses that employ them as well, right? By preserving the exemption, Rep. Wilkins and the proponents of this “sub-minimum wage” implicitly acknowledge that the work of low-skilled (or “incompletely trained”) workers doesn’t demand the same price as higher-skilled labor. That is, of course, the reason why government-mandated wages are ill-advised, poor policy.

In a recent piece, Diana Furchtgott-Roth at Real Clear Markets analyzes the effects of raising the (federal) minimum wage:

It sounds compassionate to alleviate poverty by mandating that employers raise wages, but employers often replace low-skill workers with machines. Think self-checkout machines in supermarkets, or computerized call centers.

Or, try a thought experiment — would you have your job if the minimum wage were $50 an hour? Probably not.

(Remember when Obama said ATMs were hurting the economy?)

I like that phrase ‘thought experiment.’ More Americans should give it a try. Think about it: would you be working at your current job if your employer was required to pay you $50? 

Most likely, the answer is “no.” I can tell you with almost perfect certainty that I wouldn’t be writing this blog post. I would be fired and some outsourcee on the Indian subcontinent would be given the task of maintaining this site because, as I have surely proven by now, my work isn’t worth $50 per hour.

Now, you may say, “$50! That’s ridiculous! The minimum wage will never get that high!” But why not? As long as government is setting the price for labor, why won’t they continue to raise it? After all, it not only creates praise to politicians from the ill-informed, but also worsens the problem they say they want to solve: continuing to increase the minimum wage creates higher consumer prices which politicians then cite as a need for a higher minimum wage. It’s a cyclical problem that will never end until and unless politicians muster the political will to say “no” to unnecessary government intervention. As it stands, it’s a way for politicians to appear sympathetic to the poor while worsening the problem.

Raising the minimum wage will burden employers, hike the cost of consumer goods, increase unemployment, and hamper job creation — in a state that once billed itself as a land of opportunity! It’s presented as a solution to a problem that, in reality, it only worsens. If we are going to lift Arkansas out of poverty, we must leave it to employers and employees to agree on wage levels, rather than having government dictate how much people must earn.

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One thought on “Raising the Minimum Wage: Unfair to Working Students And Still a Bad Idea

  • Wait..replacing Nic with someone from the Indian subcontinent? Why hasn’t somebody thought of this before?!?!

    Kidding. kthanks.


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