Quoting the results of a poll funded by a lobbying group known as the Small Business Majority, the Central Valley Business Times (CVBT) of Stockton, California, announced that a majority of small-business owners now support raising the minimum wage. The Times iterated the hoary refrain that such a raise “would enhance consumer spending which can increase the demand for small firms’ goods and services” and added that not only would such a raise “allow low-income workers to more easily support themselves … [but it would also relieve] pressure on taxpayer-financed government assistance programs.”
John Arnsmeyer, the founder and CEO of Small Business Majority (SBM), repeated the theme:
By raising it across the board, more Americans will have more money to spend at small businesses. This will help them create jobs which strengthens the economy overall.
The economic domino effect raising the minimum wage would have would be significant.
Another lobbying group, Business For a Fair Minimum Wage, echoed Arnsmeyer and the Times, claiming that
Increasing the minimum wage will help the economy because the people with the lowest incomes are the most likely to spend any pay increases buying necessities they would not afford before, which will boost sales at businesses.
This will increase the customer demand that businesses need to retain or hire more employees.
Henry Hazlitt, the author of Economics in One Lesson, no doubt thought he had put the matter to rest back in 1946 when he gave this explanation:
You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering.
In brief, for a low wage you substitute unemployment.
A shortcut to understanding the fallacy of the minimum wage is simply to ask: If raising the minimum wage to $9 per hour as proposed by President Obama or to $10.50 an hour as proposed by Ralph Nader makes so much sense, why not make everyone wealthier by raising it to $20 an hour, or $50, or $100?
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