Small: If you hate the poor, raise the minimum wage

If you hate the poor, raise the minimum wage

By Jonathan Small

The gap between intentions and outcomes can be vast in politics, as the push to raise Oklahoma’s minimum wage demonstrates.

Proponents say they want to help struggling citizens at the bottom of the state’s economic ladder. But in practice, their wage-policy preference yanks that ladder out of the hands of those low-income workers, leaving them not only poor but also with far less opportunity for future advancement.

Why? Because the market still sets worker rates even when government planners pretend otherwise. If a minimum wage exceeds market value, it forces employers to simply reduce hiring, shift to automation, or move jobs to more business-friendly climates.

If you doubt it, look at California.

In 2023, California increased the minimum wage for fast-food workers to $20 an hour. A recent study published by the National Bureau of Economic Research found that pay hike translated into 18,000 fewer fast-food jobs in that state.

The reality is that minimum wage jobs are largely entry-level, low-skill positions for people just entering the workforce, typically those fresh from high school. As those workers gain experience and skills, they earn more and advance to other jobs.

Take away those entry-level jobs, as happens when the minimum wage is raised above market levels, and those individuals stay low-income for much longer and have less valid reason to hope for a better economic future.

Oklahoma’s official minimum wage is $7.25 an hour, but the real minimum wage is already much higher because employers must compete for labor. Scan job postings for many entry-level positions and you will quickly find that wages of around $12 or $13 an hour are common in Oklahoma. So if you “raised” the official minimum in Oklahoma to $11 an hour, it would have little real-world impact since most jobs already exceed that level. But raise it to $20 an hour, and you would see a reduction in jobs as occurred even in California.

A proposal in Oklahoma would make things even worse by mandating automatic increases in our state minimum wage based on changes in the U.S. Department of Labor’s Consumer Price Index for Urban Wage Earners and Clerical Workers. Basically, the wages paid in Gotebo, Oklahoma, would be tied to the cost of living in places like San Franscisco and New York City. If that proposal had passed in 2015, Oklahoma’s minimum wage would be $19.04 an hour today, one of the highest rates in the nation. If a $20 wage killed jobs in California, it would slaughter them in lower-cost rural Oklahoma.

The way to help the poor is to increase job opportunities and competition for workers. The minimum wage does the opposite.

Jonathan Small serves as president of the Oklahoma Council of Public Affairs (www.ocpathink.org).