In President Obama’s State of the Union address, he called for an increase in the federal minimum wage from $7.25 per hour to $9.00 per hour.
   “It could mean the difference between groceries or the food bank, rent or eviction, scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets,” he said.
  He frames it as a social policy rather than an economic policy. Framing minimum wage in such a way is dangerous. What is true for one dollar is true for all dollars. If increasing wages by $1.75 is a good thing, why stop at increasing the minimum wage there? Why not increase it to $30.00 or $40.00 per hour? With any increase in the minimum wage, the economics are the same.
   Before explaining the economics of the issue, let us examine how one Starkville business owner said he would cope with an increase in the minimum wage.
   Matt Trenary, owner of CJ’s Pizza — Starkville, said he thinks that the cost of minimum wage would be “passed directly to consumers” in the form of price increases.
   “Businesses operate by their margins. In order to keep our percentages, the first thing I would do is raise prices,” Trenary said.
   He said he would be more likely to release less-productive workers in favor of more skilled applicants.
    “Minimum wage is our starting point. Workers who add value to the business get paid more,” Trenary said.
    Trenary’s view is similar to what economics tells us.
    Wages are essentially the price of a good. That good is labor. When left alone, the market will determine the appropriate wage rate based on the demand of labor in concordance with supply. Unemployment essentially means that a surplus of labor exists. A surplus occurs when the supply of a good is greater than its demand. As with price increases and goods in the marketplace, artificially induced higher wages result in a decrease in demand for labor and increase in supply, hence, unemployment ensues.  
   At its best, an increase in the minimum wage has a zero-sum effect on the economy, and at the worst, it reduces employment opportunity for the very people for whom it is designed to help. If minimum wage increases and no one is fired, then businesses will cope by raising their prices. Thus, the very workers who receive an increase in revenue will also see an increase in expenses. The effect is zero-sum. The market returns to equilibrium with no effect either positive or negative on workers or the economy. That is the best case scenario.
    However, another possibility is that businesses that do not wish to raise prices will release their lowest skilled workers. Thus, the very workers the law is designed to help are hurt. Their employment opportunities are decreased, and they are left in a worse position than if no minimum wage law existed at all. It is likely that some establishments would cope with increases in the minimum wage in this manner.
   When the president ignores the basic economics of the issue in favor of political points, he endangers the very individuals he claims to be attempting to help. By artificially increasing the price of labor beyond its market value, many of the lowest-skilled workers will have an even more difficult time trying to attain a job and support themselves. If the president wants to increase opportunities for low-income individuals, increasing the minimum wage is not the way to do it.