The Minimum Wage Myth

It is no longer news when Senate Republicans block a bill that would improve life for the American people. They keep coming up with interesting talking points that are not based on fact or reality to justify their failure. Yesterday, when Senate Republicans blocked a bill that would increase the federal minimum wage from $7.25 to $10.10 for an hour’s work, we heard the same stale, misinformed arguments we have been hearing since President Obama first announced his plan to raise the wage during his second inauguration speech.

The main argument we keep hearing is that increasing the minimum wage would raise prices across the board. If companies pay employees more, products and services will cost more. At first glance, this sounds absolutely correct, and it is…in theory. However, when you look deeper you will see this is not the case. The prices are not as volatile as some would have you believe and, in fact, we have seen tremendous changes in cost of production, both good and bad, that have had little effect on the average price of goods and services.

I will use Walmart as an example. Walmart CEO Mike Duke saw his pay jump 14% from last year, now up to $20.7 million. He has seen a steady increase in his pay rate every year since he became CEO, except 2010 which was a down year for the retail giant. Despite increasing CEO salary by millions of dollars, we have not seen a significant change in prices at Walmart stores. This is just an example of how paying more to employees may not lead to price jumps.

We can also look at this from another angle. If you can produce something more cheaply the price should decline. In the last decade plus, we have seen some companies shift the majority of their workforce overseas, paying far less to produce the same products. Since the job shipping began, however, the American people have not seen the affect it should have on prices. Instead of leading to lower prices, it led to record profits for many companies.

When you combine the fact that prices do not rise despite massive increases in CEO salaries with the fact that prices never dropped when jobs were outsourced, you will find that the price we pay for many goods and services have a lot less to do with how much they cost to produce. This demonstrates that there is no reason why raising wages should lead to a drastic increase in prices. This shows that if large corporations decide to only increase CEO salary by 7% instead of 14%, they would have enough money to pay employees a living wage and not raise prices. Unfortunately, Republicans in the House and Senate are both mathematically and logically challenged, and until that changes we will continue to hear the same flat, deluded arguments.

By: James Cahill

I am a Communications major currently working on my Bachelors. My aim is to educate and inform. I will always speak the truth, and tell it like it is, whether people want to hear it or not. I would like to put a stop to the propaganda and misinformation that plagues mainstream media. I am a fan of facts, numbers , and logic.