In many respects, proponents of this have good intentions. The theory is understandable that raising the minimum wage will help low-wage employees obtain better lifestyles, take pressure off social service agencies, create more dedicated employees and boost our economy. Having been in business for myself since 1975, I have seen firsthand that in the real world, all of those beliefs are dead wrong.
I don’t have any minimum-wage employees in my companies and never have. However, there are many companies that rely on the entry-level and youth employees who are most affected by the minimum wage. A 24-percent increase in the minimum wage, as proposed during the State of the Union address recently, would devastate businesses such as restaurants and retail stores where these wages are in use.
There is no room in the profit margins in those establishments to absorb the added cost of an increase in the minimum wage. Their only logical moves will be to either reduce the number of employees, raise prices to make up the difference or a combination of other business changes – none of which are good for either the consumer or the economy. There are many other costs associated with increased wages, such as employer matches within Social Security and Medicare – plus taxes under the State Unemployment Tax Act and the Federal Unemployment Tax Act, and other mandated employment costs.
What if the business owner has to cut benefits, reduce training budgets, buy lower-quality raw materials or outsource the work to other countries to reduce costs? How does this grow employment for our nation’s entry-level employees and the young people
who count on the minimum-wage jobs?
Increased minimum-wage requirements will have the exact opposite result than desired. States that mandate a higher minimum wage than is federally required usually have the highest unemployment. As a result, those businesses are compelled to exit those states. Those businesses that stay behind are burdened with higher taxes and increased social service demands. That is the reason for so many exoduses from states full of high taxes, do-gooders and extraordinarily intrusive government regulations.
Government intrusion such as increasing the minimum wage reduces freedom, slows economic growth, restricts employment opportunities, leads to inflation and slows the recovery to the detriment of all Americans.
(The writer is the owner of a local pest-control business.)