Most economic reporting is so one-sided that it's actually shocking to see a newspaper story acknowledging that there are tradeoffs in government mandates:
A huge smile spread across Katrice Thurman's face as she described all she'd be able to afford once minimum wage in Indiana increased.
"I would buy school supplies for my kids, school clothing and hopefully a car," said Thurman of Gary, who works as a sales associate at Toys 'R' Us in Hobart and supports her two young children. "It will help a lot."
On the flip side, Carl Champion, owner of Champ's Liquors in Gary, listed the items he would have to cut in his small shop in order to function while giving his employees more money.
"We'll have to reduce man hours and stay within the framework of something we can absorb, or we'll have to raise the prices," Champion said. "We'll have to work it from that angle."
[. . .]
"Raising the minimum wage provides more economic security to our state's working poor," state Sen. Frank Mrvan Jr., D-Hammond, said. "In Lake County alone, nearly 15 percent of people live in poverty. These are the people who need the increase most."
An Economic Policy Institute report in 1998 showed that minimum wage increases in 1996 and 1997 led to increased worker productivity, reduced training and recruiting costs and improved employee attendance and morale.
But those positive results will only be able to come to fruition if the businesses survive the wage hikes, said Joe Gomeztagle, executive director of the Midwest Business & Economic Research Group LLC, based in Crown Point. He said many of the small businesses simply won't make it.
Companies don't just absorb new costs and accept lower profits. They make up the difference somewhere else -- there will be some losers to offset those government-created winners. There will be low-income workers let go or not hired in the first place. The cost of goods and services will go up, and hours at some places will be cut back. And some small businesses will, indeed, be forced to close. If you want to argue that the overall effect on the economy will be positive, that there will be more winners than losers, fine. But you don't get to pretend there won't be losers.
Comments
The is plenty of evidence to suggest that increasing peoples wages increases their spending power actually helps the economy. The evidence is scant that minimum wage increases hurt businesses in any permanent way, or reduce hiring. Actually the opposit proves true in that business like fast food are able to hire and retain workers better at higher wages. If a business is that marginal that a slight minimum wage hike puts them under, they have bigger problems than that , and it wouldn't be long before something else did them in.
Also - an article in the New York Times did some very detailed cost analysis that disproved the scare tacticians exaggerations of "double and triple" costs for everything - it just doesn't hold water. Any one who knows anything about cost accounting knows that labor is seldom more than 20% (and usually less) of the cost of goods. The NYT article found that even with the most generous labor cost increases at the very most a Big Mac might go up a nickle. The bottom line is that the mionimumwage hike equals pennies at the check out stand. Please name me some businesses that the SOLE reason they went under was minimum wage hike. I am willing to bet some seious coin if they did, it wasn't just the wage hike.
If you really want to get serious about cutting labor costs and increasing profits, why not take a serious look at the millions and millions of dollars in salary and perks these big corporate CEOs get to jet around the country and schmooze at the country club.
Side note - it would be nice if this blogware had a spellchecker or at leas an edit function so we can go back and fix spelling or grammatical errors
Just get it rite teh furst time, 'K?
Agreed that raising the minimum wage can hurt business by forcing that darned "bottom line" issue, but then again, everything is predicated upon the supposition that "poor" people will WANT to work...
In many cases, they choose NOT to (and let US pay for THEM).
How novel is that?
B.G.
Here's what a lot of people don't consider. The increase of 70 cents per hour translates to $28 per week. Now take that times 100 employees and you get $2800.00 per week. While I realize the perception is, if you own a popular restaurant everyone may think you're rich, but if you're familiar with profit margins in the restaurant biz, that $2800 bucks WAS the profit margin (if you were lucky)...
but the good news is, the teenagers have $28 bucks more before taxes to spend! Thank God for that.
Employers have benefitted from not having a minimum wage increase in 9 years. Due to inflation, employees at the bottom of the pay scale have lost ground as the inflation adjusted wage actually went down. No wonder fast food joints and retailers seem to struggle to find and keep good help.
For inflation adjusted mininum wages to be back where they were during the last increase they should be closer to 9 bucks an hour.
Again as said before , if a business is that marginal that a small pay increase ( or really adjusted for inflation rates) puts them into financial hardship - they clearly have other structural or managerial issues.
So again if companies are really serious about being competitive and cutting costs - why not start at the top first rather than bottom?
You may make light of it Mr Zank, but that 28 bucks or more will then get spent back into the economy. Estimates of the wage increase put BILLIONS back into the economy - every benefits from that - right? its much better for the economy for people to spend money they have rather than the consumer deficit spending that has propped up the economy for the last 7 years.
It is also 28 bucks more per week to help those teens save or pay for college, and at the very least 28 bucks less per week that their parents don't have to help them with.
I just don't see any losers in the proposition, only whiny employers and ideologues who don't understand demand side economics.
AJ Bogle...the classic have & have nots....I was put here on the face of this Earth to provide for my family, not to put gas in the neighbor kids car.
Don't the 1.7 million people making 5.15 per hour in 2006 have to start somewhere? Like maybe at the bottom of the ladder like the rest of us? This ridiculous sense of entitlement infuriates me.
Since the beginning of recorded history, there has been a poor class, a middle class, and a wealthy class. Those that have worked hard have risen above poverty while others will not. You think transferring my tax dollars to somebody else in America 2007 is going to miraculously solve that problem????
Common sense can be such an elusive concept.
You NEED a poor class...hell, that's just good business!
The problem comes when being "poor" is more financially stable than being middle class vis-a-vis all the freebies for poor people is a lot better than working for a living and earning your own way.
And let's not forget that cities with larger poor populations get a TON of money from agencies all over the place...to keep them where they are.
Poverty IS profitable...for all the wrong reasons.
Ask those "playing the system".
B.G.