The Cost Of Idealism Setting The Appropriate Minimum Wage

The Cost of Idealism: Setting the Appropriate Minimum Wage Blake Kaiser-Lack Williams Economics 19 November 2015 In Seattle this past August, Ritu Shah Burnham and his 11 co-workers at a small ZPizza lost their jobs and business to one seemingly beneficial culprit: the minimum wage. After huge wage hikes in cities like Seattle, San Francisco, and Oakland, small businesses similar to Burnham’s have been following suit due to increased labor costs that eradicate businesses’ ability for self-sustainability. But how can such a pure-hearted idea cause such economic degradation across the entire nation? Pure intentions do not always breed good policy, and the cost of idealism†¦. When the first federal minimum†¦show more content†¦Like anything, labor is a commodity. It has costs, a fixed supply, and a shifting demand. The goal of any business is to find the equilibrium point of this commodity. For every business, that will be different. But if the minimum wage reflects social needs over economic needs, then it is artificial. Although the idea of Congress raising the federal minimum wage is well-intentioned, its effects on states with varying costs of living will be radically disproportionate, while a wage that is too high will lead to negative consequences for consumers, employees, and businesses alike without stimulating the economy, ultimately hurting the very people the wage hike seeks to help. When it comes to raising the minimum wage, a state by state approach is one of the only effective ways to properly handle the diverse costs of living across the nation. This is because the cost of living across states is highly disproportionate as some states won’t be able to handle the wage increases while some will be unaffected. Created by the Bureau of Economic Analysis, Regional Price Parities (RPP), a type of price index that measures price differences across regions, shows this exact trend. With a national average RPP of 100, states like Mississippi with an RPP of 86.4 and Hawaii with 117.2 show this distinct difference as these states have an RPP difference of more than 30, meaning high price differences. In easier to understand terms, a wage of say $10.10