I’ve been scanning the news for talk about what’s going to happen to businesses now that there’s been a shake up in Washington.
The more I look at the news, the “freshman class” of new legislators is largely conservative. Let me call them “Red Dogs”. Whatever the party they had to run as fiscally and socially conservative or at least moderate to be considered electable.
I just learned today that Harold Ford Jr. supposedly had the 10 commandments printed on the back of his business card!
The first inklings of change are leaking out. It sounds like a raise in the minimum wage will be in the air.
The so-called “living wage” is supposed to be $9.04 per hour to support a family of 4. That’s slightly over $18,000. Given that people in this income range pay more for all sorts of services, you wonder how they arrive at this number about “livability” and if anyone really would be satisfied if they raised the minimum wage to that level.
The question is, as the minimum wage rises, how many people will be fired because, in the opinon of their employers, their work is not worth that much.
I was with my wife and kids at Burger King Monday. The cashier told the lady in line before us about her experience at her last employer. “He fired me because he said I was sleeping on the clock. I was sleeping there but I hadn’t clocked in.”
“Sad,” I thought.
1. That you have to sleep at your workplace.
2. The alleged injustice of it all.
After receiving my order, a new picture emerged.
It was pretty messed up, so much so, I didn’t figure it was worth trying to get it straight.
I think there may have been more to the previous firing. But then again maybe it’s just because she was new.
But if she doesn’t learn fast, will she be fired as soon as the minimum wage goes up?
Probably.
How many more will too?
How many of these folks would have preferred something rather than nothing?
But will anyone hear their stories? Or will inflation just have to destroy the dollar value of the wage before they can be hired again?
And in the meantime will a call for more welfare be heard because of a sudden wave of unemployment caused by the spike in the minimum wage?
Will any thimblehead in Washington, DC connect the two? I doubt it.
Job creation is usually the province of small businesses growing.
If the minimum wage rises that will slow to make sure that the people brought on are worth every cent or more.
The Journal Blogger on November 10th, 2006 at 1:04 pm
You know, opponents of a hike in the minimum wage have been terrifying lawmakers for years about the dire consequences in lost jobs and economic mayhem.
Interestingly, though, in the states that have taken matters into their own hands and raised their statewide minimum wage, those scare tactics have turned out to be just so much dyspepsia.
In Florida, for exampple (not exactly a bastion of blue-tinged politics), the minimum wage is $6.67, which is $1.52 more than the current federal rate. It has been raised twice in recent years — first by a constitutional amendment approved by voters in 2004 and again in January or this year.
Yet, Florida’s unemployment rate is WAY below the national rate, at only 3.2%. In fact, according to information provided online by the state, “Based on the latest nationwide data, Florida had the fastest job growth rate and lowest unemployment rate of the ten most populous states and added the highest number of new jobs of all states in the nation.”
So much for that theory.
Chuck on November 11th, 2006 at 6:04 pm
Thanks for your post. This is exactly the discussion I want to see here.
In hot markets where there’s a labor shortage already, like Florida, expanding businesses probably already were paying a premium above the minimum wage any way to stay in business. Therefore the increase didn’t really have much impact. In that case “so much for the theory that raising the minimum wage DOESTN’T affect unemployment.” By definition the market had already established a minimum wage and government legislation did not tamper with the market forces at work.
In other words, if the prevailing wage for entry level unskilled work in a particular area is at or below the enforced “hike”, of course it won’t have a discernable impact on immediate unemployment.
Unemployment figures don’t show the impact of people out of the workforce trying to get in though… people on Temporary Assistance To Need Families who because they were not on the unemployment roles were not counted, teens entering the job market who’ve never worked before, and seniors trying to get back in because of the erosion of retirement income who may have few marketable skills may be hurt but not be counted as casualties.
Raising minimum wages can also encourage youth drop out rates to be incrementally higher because the wages seem “livable” to teens who – as a result – don’t see the need to continue in High School.
In cold market places like declining urban and stagnant rural areas, where entry level positions are at the minimum wage level and there’s a surplus of unskilled labor, I fear for the impact on small business.
But thank you for helping me think more clearly: My fear is that “Government mandated minimum wage increases above the wage levels previously dictated by market forces will raise unemployment.”
For readers wanting to hear other economic perspectives, you might check
http://www.heritage.org/Research/Economy/wm1176.cfm
or
http://www.mises.org/story/2130
Here, it will hurt small business.
And as I noted, I’m talking about the most vulnerable workers – that real person in front of me who will likely get canned.
But it’s nice to know our legislators in Washington were actually afraid of meddling in one aspect of the economy and our lives – at least temporarily!