Nebraskans would do well to avoid artificial market controls like the minimum wage | Comment

Having a minimum wage sounds good in theory – an established price floor ensuring that workers are not taken advantage of by guaranteeing a minimum wage. This belief is based in part on a few assumptions that are not always true – employers make enough money to be able to afford to pay it and that raising a salary to an artificial level will have no impact. on other sectors. economy.

Initiative 433, which will be considered by Nebraska voters on Nov. 8, would gradually raise the minimum wage to $15 in four stages by 2026. It would also establish adjustments each year after for inflation. This could be a problem because there is never an end to the upward spiral.

With the runaway inflation of the last 15 months, it could be argued that the minimum wage has already reached the proposed rates in Nebraska. For starters, it would be changed from $9 per hour to $10.50 per hour on January 1, 2023. In reality, many fast food restaurants and other minimum wage employers are already paying higher wages. higher than that.

The biggest problem with these kinds of controls — such as minimum wages, wage freezes, or any kind of price controls — is that they only have short-term benefits from what they were meant to do. For decades, American economics courses at universities have debated these concepts and encouraged free markets.

Setting a minimum wage that is too costly reduces incentives for employers to hire teenagers or low-skilled workers because they are not yet productive enough to earn it. This makes employers less likely to hire teenagers or those who are already struggling to find work, which contributes to unemployment.

Charging an employer a higher salary than the employee brings in also leads to automation. This often happens on assembly lines or at fast-food outlets like McDonald’s, where many restaurants have replaced workers with touchscreens and apps so people can place their orders without humans.

When companies cannot afford to absorb the additional costs, they raise prices. The result is more inflation. In 2021, inflation hit a 40-year high with goods and services increasing by 7.1% compared to 2020. So far in 2022, inflation is even more serious as it continues to rise at historic levels.

While raising the minimum wage sounds like a good thing, it will happen naturally and has happened before. There is a labor shortage across the country, including Nebraska, which will ultimately dictate labor costs.

Countless Nebraska employers pay well over $9 an hour to attract employees. In a market economy, the laws of supply and demand will prevail over artificial price controls, however well intentioned.

James V. Hayes