Michael Rathbone

There's been a lot said about this new minimum wage proposal in Saint Louis. However, there is an interesting topic that gets lost in the back and forth about how many jobs will be lost (quite a few) versus how many people will be lifted out of poverty (not many) if the minimum wage goes up. That topic is how workers can benefit from wage competition among businesses.

In a free market, as workers compete for jobs, businesses also compete for workers. If a worker won't bring enough value to an employer to justify his/her salary, he or she will not be hired. On the other side, if a business doesn't provide an attractive wage to a worker, that worker will find work elsewhere. Thus, both sides have to provide enough value to the other.

You might think that big business might be immune from these forces, but you'd be wrong. Even the largest companies have to offer decent wages to their employees. Take Walmart for example. It has the highest revenue of any company in the world and is one of the largest private employers in America. Even it has to compete for employees. That competition results in jobs paying higher than the (current) minimum wage.

I took the above picture at a Walmart in Saint Louis County last Wednesday. The starting wage is $9.00 an hour, which is higher than the minimum wage. Is Walmart making this offer out of the goodness of its heart? That's doubtful. They're probably offering a high starting wage because they recognize that if they don't workers will head over to Target, Costco, or Walgreens instead.

That's how the free market is supposed to work. Increasing the minimum wage is popular with the public, but it is not good policy. An individual and a business should negotiate compensation that is mutually agreeable to both parties. Mandating a higher minimum wage will end up mandating unemployment.

About the Author

Michael Rathbone
Policy Researcher
Michael Rathbone was a policy researcher at the Show-Me Institute. He is a native of Saint Louis and a 2008 graduate of Saint Louis University, where he earned a bachelor of science degree in biomedical engineering.