Watching our very own Christine Rousselle discuss the minimum wage on CNN last Monday night made me realize something very important: people don’t understand the concept of minimum wage and its impact on society. It seemed as though Ms. Rousselle was one of the only ones on the panel that had a clue of the dangerous impacts of minimum wage, seeing as how half of the panel kept explaining how increasing minimum minimum wage would give more money to the people who need it most.

That’s not how it works.

By increasing minimum wage, what people fail to see is the unintended consequences of said action. We have to look past the ends of our noses and understand that by increasing minimum wage, we don’t just give people more money- the whole economy suffers.

Here are just a few of the consequences of increasing minimum wage:

A decrease in the demand for workers (aka: more unemployment). For anyone who has taken an economics class, you know that when demand for something goes down, supply increases. In laymen’s terms: when businesses can’t afford to pay workers, the demand for them decreases, leaving a great number of people unemployed (greater supply). According to an article by Linda Gorman, a senior fellow at the Independence Institute, a “10 percent in crease in the minimum wage would decrease employment of low-skilled workers by 1 or 2 percent.” Pretty self explanatory.

Supply & Demand in Labor Chart

Decreased Numbers of Full-Time Jobs. For those who are lucky enough to keep their jobs, they can expect their number of hours to sink. Because employers can’t pay the increased hourly wage, employers will be relegated to giving employees less hours in an attempt to not pay as much, consequently creating more part-time employment.

Decreased Fringe Benefits. Because employers are now concerned with meeting minimum wage standards, they will be unable to afford fringe benefits on which many employers depend (Insurance, on-the-job training, vacations, etc.). Since many employers would have to transition to part-time employment, employees would not only get fewer hours but also not receive expensive insurance benefits.

Across-The-Board Increased Prices of Goods. Wages are considered an input price, or something that goes into the development/ manufacturing of the product. If wages are higher, the amount of money it costs to manufacture some good increases. In order to close the profit-loss gap, industry will be forced to raise the prices on goods in order to cover their costs. Or, of course, they can cut labor and mechanize which brings us back to the issue of further unemployment.

See? The minimum wage has a greater effect on the rest of the economy and society than just giving people more money–and this only the tip of the iceberg! If you didn’t understand any of the economic jargon above, understand this: there are unintended consequences with every action. Increasing the minimum wage only places our country in further economic distress. People are already forced to take cuts in hours and benefits while still having to cope with the increased cost of goods. By increasing the minimum wage, we only exacerbate the issues rather than solving them.

If we want to resolve the issues our country is facing, increasing the minimum wage is not the place to start.

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Hank Prim | Hillsdale College | @HankPrim