February 25, 2019
by John McClaughry
In Vermont Digger’s article on the $15 minimum wage bill about to pass the Senate, Gov. Scott’s spokesperson Rebecca Kelley is quoted as saying that the governor “could support a minimum wage increase if the proposal included provisions to prevent adverse economic impacts of such a hike.” Great idea! Lay the higher minimum wage burden on small businesses, then contrive to have the taxpayers (who else? Mexico?) subsidize the small businesses for their losses. Brain dead doesn’t seem too harsh a verdict for this sort of thinking.
The hard fact is that when the government mandates a wage above the market wage, some people will see a bigger 
paycheck, but some other people will disappear from the labor force as businesses can’t afford to pay them that much. What about them? They are typically low-skilled young, minority, part-time workers. What are their opportunities to climb the income ladder, when the bottom legs of that ladder are closed off to them?
Most of the jobs paying at or near the minimum wage are created by small businesses, including agriculture. Forcing those businesses to pay more creates a strong temptation to relocate elsewhere, automate jobs, or go out of business. Where does that leave the young, low-skilled would-be worker? Out on the street, with all the temptations and vices that often brings.
There’s nothing new about this analysis. As I wrote in June 1993: “Increasing the Vermont minimum wage will simply demonstrate, once again, that the legislature is under the control of people with no knowledge of economics, plus liberals who believe that government should mandate higher incomes for their favored constituencies, plus plain cowards who hope that the victim of the minimum wage (largely unorganized and voiceless) will blame the loss of their jobs on something else. Raising the minimum wage is one more sure step toward destroying what little is left of Vermont’s economic competitiveness. Worse yet, it is a crime against the people who are supposed to be helped.”
— John McClaughry is vice president of the Ethan Allen Institute.
{ 3 comments… read them below or add one }
John, you are right on. These kind of bills are going to kill Vermont in the long run. When did it become the norm for the legislature to dictate to businesses how to run themselves into the ground. Also, it is going to impact all of us with higher prices for everything just like the Paid Family Leave bill.
It still amazes me that the people who support the raising of the minimum wage can’t see the harm it will do to the exact people they are trying to help with this legislation. Its stunning that someone can believe that prosperity can be mandated by government.
Now, of course there is another side to this issue that the EAI would rather not talk about. The neoliberal policy towards wages, particularly since Reagan, who began the neoliberal experiment in earnest, by keeping the minimum wage artificially low for decades, has taken its toll on the working class.
This and other policy points that the EAI champions, has made a once proud American middle and working class; the largest in the world, has now been relegated to one of the poorest among the industrialized economies. Indeed half of the country now makes less than $35k. In most parts of this country, that’s poverty. The middle class has seen very few gains in income since Reagan.
The EAI advocacy of keeping the minimum wage this low stems from the myth that there is such a thing as the free market; and that if the market was just left alone, middle and working class prosperity would bloom.
All markets are created. How they are created determines whether they benifit the many, or the relative few at the top, like the US, since the neoliberal shift took hold 40 years ago. Since then there has been a widening gap between productivity and wages.
https://inequality.org/research/minimum-wage/