Conservatism as a philosophical orientation rests significantly on Aristotelian philosophy, and a key point comes from Aristotle’s understanding of the individual. He argued that individuals were inherently noble, and it is the individual’s duty to flourish to achieve that nobility. Christian moral philosophers have a similar concept that they call the dignity of the human person. Both of these are important in understanding conservatism, because conservatives believe that government action should not inhibit the flourishing of the individual.
However, there exists a problem for this principle when one looks at the current nature of wages for the lowest paid workers. A question exists on how an individual can achieve their nobility while the minimum wage does not keep up with the cost of living.
Although it may seem like a magnanimous goal to increase the minimum wage, the effect on unemployment becomes deleterious. The law of demand states that when the price of labor increases, the quantity demanded (the number of jobs available for low-skill workers) decreases, holding all other variables constant. The Congressional Budget Office (CBO) has released a now well-known report that details the effect that raising the minimum wage to $10.10 an hour would have. Such an increase would reduce the number of people below the poverty line by 900,000, but it would likely lead to 500,000 people losing their jobs or unable to find a job. Reducing the poverty rate is a laudable and preferable policy goal, but when seeking the best policy, one needs to keep in mind the possible negative consequences that could happen.
The CBO’s report is not the only research to show the negative consequences of minimum wage increases on employment. Jonathan Meer and Jeremy West stated in their article “Effects of the Minimum Wage on Employment Dynamics” that increasing the minimum wage will negatively affect economic growth by limiting the amount of jobs available in the future. Furthermore, Joseph Sabia, Richard Burkhauser, and Benjamin Hansen in their article “Are the Effects of Minimum Wage Increases Always Small? New Evidence from a Case Study of New York State” found that when New York raised the minimum wage from $5.15 to $6.75 per hour, employment for those young people between 16 and 29 years old decreased by 20.2 to 21.8%.
Even given the damaging effects of increasing the minimum wage on employment, most of the country still supports the policy. A Washington Post/ABC poll determined that about two-thirds of the population supports it. Pew Research has the numbers even higher, concluding that 73% of American adults believe the minimum wage should increase to $9 an hour; surprisingly, even 53% of Republicans support the increase. Even Mitt Romney has expressed support for the idea of increasing the minimum wage.
Because of the popular support for the policy and possible disastrous consequences of a federal change, Republicans should establish their own policy towards increasing the minimum wage that will attenuate the rise in unemployment and not force too much pressure on wages. There are two policy options that the GOP might take up when the debate on increasing the minimum wage happens.
The first option is to pass an amendment to a piece of legislation dictating that to keep receiving grants and money from the federal government, each state must pass their own living wage law. Having the wages set by each state would limit the pressure on wages nationally, and it would be better policy overall because the cost of living differs by state. For instance, the required income for a single adult in Knoxville, TN is $18,431 with a living wage of $8.86 per hour, while New York City, NY has a required income of $26,521 and a living wage of $12.75. There could even be a regionally-based minimum wage in areas where the cost of living changes even between cities. In Johnson City, TN the required income is $16,272 and the living wage is $7.82 per hour. New York has an even larger difference between cities; Syracuse’s required income is $18,812 and living wage is $9.04. Tailoring a living or minimum wage based on state and regional means decreases the pressure on wages in states that cannot afford it.
The second possible policy is a tiered system where the federal government sets a minimum or living wage, but then allows small businesses to pay 75% of this. E.g. if the federal minimum wage became $11 per hour then small businesses would only have to pay $8.25 per hour. Even though it is less than the living wage, it would be a $1 more per hour than the current minimum wage. Or the minimum wage could be tiered for small, medium, and large business. For instance, the definition of a small business in manufacturing ranges from 500 to 1,500 employees. A new tiered system might allow 70% of the living wage for companies with fewer than 50 employees, 75% for those below 500, 85% for those with fewer than 1,500, and the full living wage for those above 1,500. This would decrease pressure on wages depending on the size of business and allow start-ups to hold up against larger businesses. Both the National Small Business Association and National Federation of Independent Business argue that raising the minimum wage will hurt small businesses because they cannot afford it like larger corporation can. Therefore, this policy would allow smaller businesses to still compete with larger corporations without collapsing under the pressure of increased spending on wages.
The Great Recession caused significant problems for businesses and workers while increasing the divide between the upper and lower classes. One way to mitigate poverty is through minimum wage increase, and although this will likely happen, it will also lead to higher unemployment in both the short and long terms. Republicans need an alternative to the Democratic proposition that does not take this into account, and either a federalist or a tiered approach would be most appropriate. These policies will allow for higher wages, limit the adverse effects, and help hundreds of thousands of people.