Gov’t Outrage: Up goes the Minimum Wage
Once upon a time, many years ago, I first entered the work force when the minimum wage was $3.85/hour. As of today, the minimum wage is now $7.25/hour. President Obama has said he wants to push this above $9/hour by 2011. Somehow, I’m failing to see the logic in this going through now. Let me see if I can properly express why I’m missing the logic.
The minimum wage, for the completely uninformed, is the minimum amount you can pay a non-tip wage worker in the United States now on an hourly basis. So much of the retail and service industry now has to look at their payroll and figure out how to account for an additional $0.70/hour per employee. Looking over the course of a week, month, or year, that’s going to be a fairly large chunk of change for any business.
This is happening in the middle of a recession. Yes, there are signs we’re in recovery, but it’s not certain at this point. If you look, you can find signs pointing either directly, not to mention the possibility of a rebound recession as well as inflation worries. Now, added on top of this, you have a situation of employers having to figure out what to do about their payroll.
One thing this is going to do is increase the number of unemployed in the country. The first reaction in this situation for many employers is to cut someone from the payroll to account for the increase in costs. By removing that one person, everyone else is able to get their raise. Sure, it sucks for that one person, but them’s the breaks sometimes, right? Another option is to cut hours for everyone on your payroll. So yes, you’re not making $0.70/hour more, but you’re not getting as many hours as you used to get. And let’s not forget that various Union contracts out there state that if the minimum wage goes up, the wage for all Union members has to be increased by that same amount.
Action and Reaction isn’t just a law in Physics. It applies about everywhere, including Economics. This is going to have a solid impact on economic growth in the US and is, at best, going to slow the climb out of the current recession if not retard it completely.
Also, before anyone feels the need to point it out, this increased was passed on Bush’s watch after the Democrats took control of Congress. This is definitely one of those things where the blame rests solidly on both sides of the aisle and neither party can wiggle out of their responsibility on this.