Friday, November 28, 2014

Minimum wage hike would raise prices, unemployment

3/5/2014

Growing jobs long has been the stated priority for the U.S. government. Such growth is needed to satisfy Americans’ desire for both an improved economy and standard of living. While job creation has again begun an upward trend, a significant increase in the country’s federal minimum wage — as has been proposed by President Obama — could derail that movement and send our jobs trajectory the wrong direction.

Across-the-board wage increases for all would be welcomed by many, especially those at the bottom of the pay scale, but the economy still might be too fragile for such an initiative. Any pay increase at the bottom means pay increases for everyone above them on the pay scale too. The large scope of pay increases required to maintain equitable pay would, without a doubt, require higher prices for businesses of all sizes, so little actually would be accomplished.

Growing jobs long has been the stated priority for the U.S. government. Such growth is needed to satisfy Americans’ desire for both an improved economy and standard of living. While job creation has again begun an upward trend, a significant increase in the country’s federal minimum wage — as has been proposed by President Obama — could derail that movement and send our jobs trajectory the wrong direction.

Across-the-board wage increases for all would be welcomed by many, especially those at the bottom of the pay scale, but the economy still might be too fragile for such an initiative. Any pay increase at the bottom means pay increases for everyone above them on the pay scale too. The large scope of pay increases required to maintain equitable pay would, without a doubt, require higher prices for businesses of all sizes, so little actually would be accomplished.

With more than 60 percent of minimum-wage earners being entry level or first-time employees, their skill set doesn’t support something higher than a minimum wage. Pay increases ought to come as the result of employees earning higher pay by way of a stronger performance on the job rather than just increasing wages without a requisite performance improvement. A report by Congress’ nonpartisan budget analysts predicts the proposed minimum wage increase from $7.25 per hour to $10.10 per hour would result in a loss of 500,000 jobs. That’s hardly the right path to improve the economy.

As the economy improves, businesses’ expansion will result in more jobs. The increased number of jobs will yield a more competitive marketplace, and businesses will have to compete for the best employees with better compensation packages, which includes higher wages.

Meanwhile, increasing the wages of 900,000 people above the federal poverty level by 2016 could result in fewer teens making more money, but also carrying a bigger share of the load at the proverbial fast food restaurant because the business no longer can afford to keep as many employees on the payroll. Those restaurants also will be selling fewer food and drink products because of higher prices needed to support a mandated $31 billion increase in wages.

The country’s improving economy isn’t suitably prepared for businesses — large and small alike — to be forced to raise wages. Mandating businesses to pay more than the value an employee brings to the workplace with them just doesn’t make good sense and is bad policy. Market factors will drive up wages and Americans’ standard of living, while simultaneously growing jobs — but only if the minimum wage is left alone.

 

— Jeanny Sharp,

editor and publisher

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