April 30, 2009

Caution: Minimum wage regulations may have serious side effects

Minimum wage regulations are usually put into effect to ensure the working poor do not fall victim to greedy corporations and unbearable debt. Politicians often boost their success in passing such laws and credit themselves as the rescuer of the average Joe. What may not appear to them is the significant relationship between minimum wage rates and unemployment. Such a relationship has been a part of economic theory for quite some time now, yet most political figures brush it under the table. CNN is often there to ensure they can get away with such nonsense.
In an article published this week titled “Unemployment: 109 cities at 10% or higher” news reporter Julianne Pepitone gives a prime example at how little the media knows about what is going on in today’s economic world. This article looks at cities with unemployment rates over 10 percent. Pepitone does not bother giving much of a reason as to why unemployment is sky rocketing in these cities, which she probably would just blame it on Mexico or President Bush anyway. Instead she rambles on about how horrible the economy is compared to a year ago and repeats the same things every other news reported so brilliantly has already said. I think the real story in this article has yet to be discovered.
Nine out of ten of the highest unemployment rates listen in the article are in cities that also have the highest minimum wage regulations in the country (California and Oregon). Doing more research, it became apparent that Michigan, Rode Island, and California have the highest overall unemployment and all three have minimum wage rates over the federal rates. Wyoming, North Dakota, and South Dakota hold the lowest unemployment rates in the country (all below 3.5 percent) and all have minimum wage rates lower or the same as the federal standard. Of course, many factors could be hidden behind these statistics such as, population and industry, but it does appear that a connection does exist.
When it becomes too expensive to keep hired help, firms lay them off. If firms could instead offer a lower salary people could keep their jobs. And in times like these, less money is better than no money. The government has tampered long enough with concepts they know little about. Passing minimum wage rates could to be to blame for the increasingly high unemployment rates in these cities. While other states keep unemployment at bay, high paying states are reaching rates that were last seen in the great depression (25%). Perhaps government should stop trying to save the day with their ridiculous bail out plans and instead just abolish the laws that are holding back capitalism from correcting itself.

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