In order to understand the effect of minimum wage laws on actual wages and employment, it is important to consider the effects that such laws have had in states that raised the mandatory minimum wage. Fundamentally, when the heavy hand of government attempts to arbitrarily determine what employers must pay their employees, the effects can be devastating for employers and their employees.
Mississippi does not currently have a state-mandated minimum wage. Instead, employers in the state are subject to the federal minimum wage of $7.25 an hour. The federal minimum wage has a disproportionately high effect in Mississippi versus other states. This is because the dollar has more purchasing power in Mississippi than in any other state. Furthermore, it is harder for Mississippi businesses to generate a dollar of capital than other states. For instance, the federal hourly wage of $7.25 in Mississippi has the same purchasing power as $8.12 in Utah, where the federal minimum is the standard as well. Despite this, Mississippi is required to follow the same federal minimum wage as Utah.
While the federal minimum wage already has a disproportionate effect on Mississippi, House Bill 206 proposes raising the state minimum wage to $10.00 an hour, $2.75 above the federal standard. Because individual dollars have a high purchasing power in Mississippi and are harder for businesses to earn, such legislation could have an even-higher burden on workers and businesses than what has been seen in other states that have raised the minimum wage.
Consider the state of California. California has raised its minimum wage steadily over the last several years, which has ultimately led to a steady decrease in employment growth for certain industries. For instance, a Harvard Business School study found that a $1 increase in the minimum wage requirement led to a 14 percent increase in the likelihood of the closure of 3-star restaurants in the San Francisco area. Needless to say, when businesses close, it leaves many of the employees without employment at all.
California stands as a cautionary tale, and its minimum wage currently stands at $14 an hour for small businesses with less than 25 employees. The current proposal to raise the minimum wage to $10 in Mississippi might seem to be distant from the $14 wage in California. However, a $10 minimum wage in Mississippi could have the same negative effects as a $14 minimum wage in California. Because the dollar's purchasing power is higher in Mississippi, $10 in Mississippi is the equivalent of $13.30 in California -which is not too far from the damaging $14 minimum wage that has plagued California. Mississippi needs economic expansion, and the state should not handcuff businesses from providing employment. Rather than using the power of government to force businesses to follow arbitrary increases on the minimum wage, the state should reduce heavy-handed taxes and regulations that burden businesses and workers. The free market provides the tools for workers and businesses to grow. Mississippi should let its people work. A key way to do that is to avoid arbitrary minimum wage increases.