Isn’t it great for people when minimum wage is increased? Last week, the lowest tier in the employment sector saw their wages increased from $5.15 to $5.85. Over the next two summers the minimum wage will increase another $0.70 to $7.25 by July 2009.
John Kerry said in a report that:
“In fact, the last time Congress raised the minimum wage, our country experienced the strongest economic growth in decades. We saw lower unemployment, lower poverty rates, and lower inflation.”
Somehow, Senator John Kerry is trying to argue that the technology boom of the late 1990’s was caused by the increase in minimum wage in 1997. This is a bad correlation because if it was true, we would have an economic boom each time they raised the minimum wage. History tells us that this is not the case. In fact, with the newest minimum wage hike, it looks like we’ll be going into a recession with the sub-prime mortgage fallout which will trickle through the rest of the economy as the S&P has its biggest two down days since September 2002.
Minimum wage hikes hurt more people than they help.
A poll last year by the Gallop poll said that “86 percent of small businesses would not be impacted by an increase in the minimum wage“, however in a much more recent survey it said that “nearly 60% of small business owners will not be able to off-set the cost of the wage increase.”
It doesn’t take a rocket scientist to understand that if costs increase, those costs will be passed on to the consumer. Now, that small business owner will be paying more to his vendors for parts and supplies, and he will also have to pay more for his employees to put those parts together. It would be noble of him to say, “Well, I don’t want to raise my price so I’ll have to live with my profit margins being smaller”. The more common response is “I can keep my prices the same but I won’t have enough to keep all of my employees or hire new ones. Also, I have a family to feed. I will have to increase my prices so I can keep all my employees, maybe hire new ones, and provide for my family”.
That same report says that small businesses have the hardest time handling wage increases. They now have to look at payrolls and budgets so they can eliminate jobs or other resources so they can still run their business. Not only will they have to lay off some workers, they may also have to stop new hiring altogether.
Those already on fixed incomes will be the hardest hit when goods and services are increased to meet the demand of higher minimum wages employees.
What once cost $1.25 to purchase will now be $1.50. That’s what happens when minimum wages are increased. Increased costs do not promote increased production.
In the end, minimum wage hikes don’t solve the problem of these employees finding better paying jobs so they can increase their quality of living. It just keeps them exactly where they are in life. Their paychecks may be bigger, but their bills will offset any financial increase in their paycheck.
Minimum wage should be a discouragement so employees find something better, not an opportunity to be cheered.