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Market Economy: Wal-Mart has decided to give 500,000 workers a $1 billion pay raise by boosting its basic rate to $9 an hour in April and to $10 by February. And imagine this: It didn't need government to do it.
The retail giant should be Exhibit A in the argument against imposing a one-size-fits-all minimum wage straitjacket on the U.S. economy.
It's raising wages for workers not because it wants to be nice, but because the market for people who can do Wal-Mart jobs has tightened in recent years as modest job growth has been restored to the economy.
The reason for this? In a word, competition.
"Competition helps everyone get the best deal," wrote Mitchell Tu at the Heritage Foundation's Daily Signal blog. "Consumers flock to Wal-Mart because it offers products at competitive prices; investors buy Wal-Mart stock because it earns competitive profits; and workers will apply for jobs at Wal-Mart because it pays competitive wages."
Exactly. Competition is the greatest force for good in a market economy. It keeps everyone honest. Only when government interferes with fair markets do outcomes get skewed. Now that Wal-Mart's wages are going up, can Target and others be far behind?
By contrast, when federal or state government requires businesses to pay a "minimum wage," it destroys jobs and removes from the job market minorities and unskilled young people most in need of work experience and training.
That's not an opinion, but a well-established pillar of modern economic thought. That minimum-wage proponents don't understand it is a pity.
Sure, everyone likes the idea of paying low-wage workers more. But let's look at what happened the last time it happened, in 2007. Democrats in Congress passed a series of minimum-wage hikes that lifted the basic wage 41% from $5.15 an hour to $7.25 an hour.
Two economists at the University of California, San Diego looked at the results of that move. In states where wages were already high, there was little impact. But in low-wage states, the impact was huge.
Indeed, the UCSD study found that the minimum-wage hike, separated from the effects of the financial crisis, cost the economy 1.4 million jobs. And it may have played a big role in the surge in U.S. poverty rates.
President Obama and Democrats have called on Congress to raise the federal minimum wage from the current $7.25 an hour to $10.10 an hour.
That's a 39% increase that the nonpartisan Congressional Budget Office estimates would cost as many as 1 million jobs if put in place.
Americans should know this. A minimum-wage hike sounds nice, but it destroys jobs by placing a government tax on hiring young, uneducated, minority and low-skilled workers. Wal-Mart and other companies have a better answer. It's called competition.
Read More At Investor's Business Daily:
http://news.investors.com/ibd-editorials/022315-740537-competition-not-big-government-pushes-up-wages.htm#ixzz3Sh93BgMm