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Economics of Tlaib’s Ridiculous $20 Minimum Wage Idea

These Democrats either do not understand how the minimum wage works, or they are disingenuously pushing for an impossible policy they believe to will be popular just to get elected.

Economics of Tlaib's Ridiculous $20 Minimum Wage Idea 1 (Photo by Zach Gibson/Getty Images)

The economically illiterate Rep. Rashida Tlaib (D-MI) has continued to push the party-wide auction of a higher federal minimum wage with a proposal of $20 per-hour, following the previous push by the left for a $15 per-hour federal minimum wage.

“Big fights like this one, $15. By the way, when we started it, it should have been $15,” the freshman congresswoman spoke of the federal minimum wage. “Now I think it should be $20 … It should be $20 an hour.”

“They say all this is gonna raise the cost,” she so eloquently added. “But I could tell you, milk has gone up, eggs has gone up, everything has gone up, the cost of food has gone up, the cost of a lot of things we need has gone up already.”

Unsurprisingly, Tlaib must have ignored recent research on this subject, continuing her apparent pattern of disregarding information on economics throughout her career in order to maintain faith in her political stances. Earlier this month, the Congressional Budget Office warned that a federal minimum wage increase would cause mass unemployment proportional to the increase of the federal minimum wage. For example, increasing to $10 per-hour would cause up to 100,000 job losses, $12 per-hour would cause up to 800,000 job losses, and $15 per-hour would cause up to 3.7 million job losses.

Additionally, Bernie Sanders, who is somehow becoming RELATIVELY more moderate as the Democrats sprint their way farther and farther left, recently felt the burn as his campaign staff have demanded a $15 minimum wage, which he has championed for years. Since there is only a finite amount of money, which is an idea that seems to be incomprehensible to the left, Sanders had to cut the hours of his employees by a third in order to pay them $15 per-hour. Less work and more unemployment is the foreseeable result of these policies, and Sanders was able to experience this first hand.

These Democrats either do not understand how the minimum wage works, or they are disingenuously pushing for an impossible policy they believe will be popular just to get elected. These minimum wage laws are misnamed. The true minimum wage is $0, meaning no one is guaranteed a job, no employer is forced to employee someone. A $15 per-hour federal minimum wage law would just outlaw the ability of an employee to work for less than $15 per-hour, even if they want to. So, if someone cannot find an employer that will hire them for $15 per-hour then they will not be able to work, and they will have no money. This is what causes the unemployment, many employers are either unwilling to hire an employee that does not produce enough to hire such a large investment, or they are unable to afford to hire such an expensive employee (or both).

Further, for the few employers that do hire the more expensive employees, the price of labor will now be increased. In order to offset the increased price of labor, the employers must increase the revenue earned by increasing the costs of the goods produced. Otherwise the business will eventually fail from the imbalance of the price of labor to the revenue earned. This is essentially basic algebra. For example, in the most simplified way I can mathematically explain the minimum wage:

E = Employee
D = Dollars per hour
R = Revenue (after business expenses other than employee costs)
P = Profits

P=R-(E*D)

P must be greater than zero in order for this to be possible, otherwise the business is losing money. If D (dollars per hour) is increased than either E (employees) must be decreased or R (revenue) must be increased, which would push the price of the goods produced upwards. When you legislate a minimum for D (dollars per hour), then you effectively legislate a maximum for E (employees); or you drive up the cost of goods, which means increased cost of living and nullifies the benefits of the increased wages in the first place. This is the most basic economics, this is supply and demand.