Politicians often say they want to help struggling Americans when pushing policies such as minimum-wage laws, but all they’re doing is parading their faux compassion to win favor with voters.

In this AIER article, George Mason University professor Donald Boudreaux looks askance at minimum-wage laws, particularly the argument commonly heard from Democratic politicians that such laws should be enacted because businesses can supposedly afford to pay workers more. Boudreaux writes:

Rarely does a semester pass that I’m not asked by a student – following a lecture on the economic consequences of minimum wages – why “rich” companies, such as Walmart and McDonald’s, would cut employment when minimum wages rise. “They can afford it!” my students protest. “These companies are highly profitable and have lots of assets.”

So, what’s wrong with that claim? Boudreaux explains:

For Walmart to continue to employ . . . 200,000 workers at an hourly wage of $15, it would lose $4 on each one every hour. That’s an annual loss to Walmart of $1,664,000,000. In order to get this hefty sum that’s necessary to overpay these workers, Walmart would have to eat into its assets. It would, for example, buy fewer delivery trucks and repair its existing fleet less frequently; it would hold less inventory; it would allow the quality of its customer service to deteriorate; it would build fewer or only smaller new stores – all of which would reduce the attractiveness to consumers of shopping at Walmart. Walmart’s market valuation would then fall as investors become less keen on owning shares of a company that not only is experiencing declining sales but also is eating into its capital.

Businesses that aren’t “rich” like Walmart can’t “afford” higher labor costs for even a short while without losing money.

Bashing big business is mere posturing by politicians who pretend to want to help lower-wage workers. Minimum-wage laws do no economic good but are in fact harmful in that they encourage people to believe that the way to get more money is to clamor for it from the government.