There is a lot of talk lately about raising the minimum wage in Minnesota from $6.15 to $9.50 per hour. Why stop at $9.50? Let's increase it to $15 an hour or even $20. Average income would soar and businesses would be giddy with increased sales. Taxes would flow into state coffers, making Minnesota the envy of every state in the Union.
Unfortunately, the state cannot create wealth by artificially raising the minimum wage. Wage rates are established through competition. If there is a surplus of labor, employers will not increase wages. If there is a shortage of labor, employers must increase wages to attract workers. Look at North Dakota's oil fields. North Dakota has a minimum wage of $7.25, but I've read McDonald's pays $22 per hour. General laborers get $45 per hour. It's based on supply and demand.
For the last five years America, and Minnesota, has had a shortage of jobs. Wages have not increased substantially for five years. In 2005 1.9 percent of Minnesota workers received minimum wage. In 2011 it was
6.1 percent. Despite trillions of dollars in stimulus money, the economy remains stagnant.
Democrats want to help the poor by increasing the minimum wage by 54 percent. But it will not help the poor. Small employers will reduce their numbers of employees or go out of business. Many will increase prices, thereby hurting the very people a minimum-wage increase was intended to help.
ADVERTISEMENT
There are better ways to help the working poor, such as the earned income tax credit. It's directly targeted to poor people and rewards them for working and increases the labor supply.
The first thing, though, is to get the economy growing and creating jobs. Then let the marketplace decide wages. Everyone will get a raise, not just the lowest-income workers.
Barry Bergquist
Cloquet
