True Lies and False Confessions

I got to thinking about the calls for raising the minimum wage and also about the ‘pay as you go’ concept in government spending. After tossing in unfunded mandates, I have been wondering if the solution for raising the minimum wage is for the government to fund its mandate.

First off, let me say that I am against government forced wage increases. I think they are the bane of capitalism and totally screw up the natural order of supply and demand. More than 80 studies have shown that an increase in the minimum wage have caused job losses, especially among both younger and unskilled workers. Employers tend to hire more qualified workers as a solution when forced to pay higher wages with no corresponding increase in production or quality. In short, their costs go up but with no increase in the value of goods or services produced.

That being said, I see it as similar to unfunded mandates; specifically the programs that the federal government writes into law without sufficient funds to operate them. This usually causes a shortfall in a state provided service that leads to a reduction in service or quality in the program being offered.

So how do ‘pay as you go’, unfunded mandates, and raising the minimum wage all tie together? I propose that if the federal government raise minimum wage, they pay for it in with tax credits. If you’re an employer that is forced to pay an employee $3800.00 more a year, you get a deduction of the $3800.00 plus any increased costs associated with that wage increase.

This has the benefit of raising the wage of low-income workers and eliminating the costs/profit problems that lead to lost jobs. If government is serious about ‘pay as you go’, then it truly needs to ‘pay as you go’.