By: Eduardo Miranda, Young America's Foundation Intern
At a recent policy discussion I attended in New York City,
several individuals embraced support for increasing the city's
minimum wage. One individual declared support for an $11.50 minimum
wage, garnering praise from onlookers.
It is these knee-jerk reactions that make progressive policies
impossible. Let's take a simple look at what would happen to the
youth employment if the living wage was raised to such high
Business owners take on costs to provide a particular good or
service. If the cost to provide a product increases, then the
employer will have to adjust to these changes. The only options
then will be either to find new ways to decrease costs, or, raise
the price of their product.
Consumers won't like an increase. In turn, they will buy less of
Let's take a good old-fashioned American cheeseburger as an
example. Usually, one can be bought for a dollar and I normally buy
two. One day, the costs of producing that cheeseburger rises on the
supplier, and subsequently, he is faced with the dilemma, cut
costs, or raise prices. He decides to raise prices on a
cheeseburger to two dollars, which means I have to pay four dollars
for my usual two cheeseburgers, something I am not willing to do,
therefore I find another cheeseburger place that charges left.
The second option is to reduce his costs, which are simple
enough to understand. He incurs costs for supplies, labor, and
location. Finding a new supplier who charges less, but offers
similar quality is difficult enough, let alone the fact that he has
to do this while maintaining a continuity of service (or else he
won't make any money, and go out of business).
This leaves labor as the easiest to adjust quickly because an
employer dictates who gets hired. This is where students are most
Young people do not typically possess comparable skills to those
who have been in the working population longer, therefore the
employer faces another dilemma when hiring. His options are either
a teenager who has never had a job, or someone who has been in a
working environment before. The employer must now take into account
that they must also pay this new employee more than they did
before, making his investment in an employee even trickier. Smart
money says go with the guy who has had a job before, and the
student loses out on a job he needed.
Progressives counter this claim by adding a third option-the
producer can make less profit. Well, here in America, we have a
little something called property rights, which is the only reason
most of us do anything. A business gives up something (usually a
career) in order to focus on building a business. If they see less
opportunity in starting a business than in keeping a career, they
probably won't take the risk of starting that business.
Who loses out? Students and cheeseburger-lovers everywhere.