Nearly Half Of Venezuela’s Businesses Shut Down After Minimum Wage Hike

Published in Economic Liberty .

If you would like to see concrete, real-world evidence that government’s wage control policies are a bad idea, Venezuela just produced the perfect example.

As the South American country enters yet another dark period of its long battle against liberty, President Nicolas Maduro’s minimum wage rules, which increased the salary by nearly 3,500 percent at once, has wiped out 40 percent of the country’s stores.

Firms that had been struggling to stay afloat thanks to Maduro’s ongoing war on business finally succumbed, claiming that the outrageous wage increase finally put them out of business. Others that managed to remain open are only doing so to liquidate their merchandise so they can then close completely once all is gone.

According to Maria Carolina Uzcátegui, the president of the National Council of Commerce and Services of Venezuela, the situation has turned into a dead end to business owners.

“It is a perfect storm,” Uzcátegui said. “These decisions are leading many business people to say, ‘No, I can’t do it anymore.’”

The obvious and immediate consequence of this wage increase is the rapid rise in unemployment, as a massive number of employers are no longer able to provide jobs. But the job loss was to be expected, as Maduro explicitly ignored the laws of economics once again, thinking he could ignore supply and demand by mandating artificial economic growth.

In the United States, politicians have long defended direct meddling in the economy, supporting wage control laws and pushing for higher minimum wages.

The Democratic Party’s 2016 platform proposed a national minimum wage of $15. At the time, even Hillary Clinton admitted the new rules would lead to job losses, and yet, Democrats today continue to defend the plan.

Recently, Democratic candidate for Congress Alexandria Ocasio-Cortez visited Union Square’s iconic cafe, the Coffee Shop, after the firm announced it was shutting its doors after 28 years of service. The cafe said that it could no longer stay in business after Governor Andrew Cuomo’s minimum wage hike and yet, Ocasio-Cortez, who worked at the cafe at some point, continues to claim she will not rest “until every person in this country is paid a living wage to lead a dignified life.”

But despite the rhetoric, support for a minimum wage hike is about pandering to the masses, not about policies that will actually benefit workers. Even major left-leaning outlets such as the Washington Post have concluded that rapid increases in the minimum wage in certain counties would cost thousands of jobs. Unfortunately, the madness continues. And as Democrats hope to take control of Congress after the midterm elections, the fear of seeing a minimum wage law passing in D.C. could soon become a reality.

The Racist Effects Of Minimum Wage Laws

Economists Walter E. Williams and Thomas Sowell have long explained that the government’s wage rules have a very real consequence: To disproportionately hurt the black community.

As Williams wrote, racist unions in South Africa during the apartheid period were the most passionate defenders of minimum wage laws for blacks, as they wanted to make it difficult for natives to be employed.

“‘Equal pay for equal work’” became the rallying slogan of the South African white labor movement,” Williams explained. “These laborers knew that if employers were forced to pay black workers the same wages as white workers, there’d be reduced incentive to hire blacks.”

Today, a major minimum wage hike would have the same effect, killing jobs and hurting black and Latino Americans the most. But despite this reality, so-called Socialist Democrats have no problem defending and promising to push the policy through Congress whenever possible.

In no time, America could look a lot like Venezuela — if progressives get their way.

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