Saturday, July 25, 2009

A Minimum Wage Digression

It’s easy to lie with statistics, and even easier to lie without them. ~ Unknown

A regular feature of our local paper is an Opinion page standard in which an issue has pro and con points of view on a specific issue, whether dredging the bay or changing the drinking age. The segment usually has a grey pro/con moniker drawing attention to whatever debate is currently on the table. This morning the common pro/con badge was replaced by one that said con/con. Today’s topic dealt with the new minimum wage legislation that went into effect July 24, raising the minimum wage from $6.55 to $7.25. Will the minimum-wage increase benefit anyone?

James Sherk, the first columnist, presented the view that the higher wage will be bad for small businesses. Minimum wage means maximum trouble. He took the position that raising the minimum wage will damage the small business’ incentive to hire new employees, and it is the lesser skilled employees who are most vulnerable to layoffs should they be required during tough times.

According to Sherk the current hard times are an especially bad time for this law to kick in. The value of low paying jobs is not the money they provide, but rather the job experience they offer.

The opposing view was actually, as indicated by the caption con/con, an argument in agreement with the first columnist, except from the point of view of the damage it does to workers. Holly Sklar begins with an interesting stat, that minimum-wage workers are making over five thousand dollars less today than in 1968, despite the fact that the minimum wage has risen significantly.

Whereas Sherk argued that a minimum wage increase is a bad thing during hard times (10% unemployment) Ms. Sklar points out that the original legislation was conceived and put into play during even harder times, the 1938 Great Depression, when unemployment sat at twenty percent.

In point of fact, Sklar is not opposed to minimum wage legislation at all, simply this one which she feels is inadequate to the task it aspires to. Her desire, and the aim of her organization Let Justice Roll Living Wage Campaign, is to see a ten dollar an hour minimum wage in place by 2010.

But what’s the reality behind all these various stats and facts? Do higher wages help the poor or do they help the government by giving them more money to tax? Who benefits when higher wages result in a higher cost for goods? It may be simplistic but my guess is that we will only see more shuttered factories because in a global economy we are not going to see the same higher prices on imports from China.

I do not know all the facts on these matters but common sense says to me that if the government wants to control how much money people bring home, one way they can do this is by lowering taxes. Forcing businesses to pay more only makes businesses raise the prices for their goods and services. Common sense says as much. The loser, then, is the consumer who sees a reduction in his or her purchasing power.

In other words, it’s smoke and mirrors. What do you think?

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