Editorial

Minimum wage hike is maximum stupidity

January 31, 2014
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President Barack Obama’s State of the Union speech last week was little more than rhetorical practice, and the Business Journal might have ignored a speech void of substance, but the resulting debate regarding minimum wage levels demands comment, lest simple minds believe it is a method to boost the economy.

Obama made minimum wage increases his 2014 mission and not just a boost to the federal minimum wage but to well more than the rate of inflation — to $10.10 per hour, up from the current federal mandate of $7.25.

It is in fact just more political rhetoric. The federal government already pays its contractors more than the minimum wage, and more than a dozen states already have raised minimum wage levels within their boundaries. Those states are desperately recruiting to their labor force. The political popularity gained is short-lived, especially as the consequences of such a move further fractures “the economy” proponents believe they are “assisting.”

— Fewer than 5 percent of hourly workers earn minimum wage. Any additional spending to spur the economy would have little impact.

— Few providers of minimum wage jobs see such employment as a career track. Even those dependent on such jobs are better served by educational resources and a “track” out of minimum wage jobs. The issues attendant to education are well documented and deserve correction. The call for minimum wage improvements can be seen as a clarion call for education funding at all levels, including student loan funds and interest levels.

— Such oversight as to “fair” wages and the resulting mandate to business owners comes heaped upon the tremendous burdens and increases businesses are absorbing in the first blows of the Patient Protection and Affordable Care Act. In fact, any forced change to the federal minimum wage at the level suggested will have the reverse effect on those politicians thinking it will draw favor in mid-term elections. The Business Journal suggests it would be a political poison pill instead.

While the effects could be crippling to the legions of small businesses (fewer than 20 employees), every business would pass along the impact in pricing. As prices rise, those still employed in minimum wage jobs will see that extra $2.85 an hour mostly absorbed by the price increases.

The most impactful issue on wages is supply and demand, as demonstrated across the country. Already retention and recruitment have spurred states (and the federal government) to boost wages and attract workers. No new mandate is needed.

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