Friday, July 28, 2006

The Minimum Wage Comes Up Again

This issue drives me crazy. (I am working from an article found here.)
Now they want to raise it from $5.15 to $7.25, that is over a 40% increase. I don't know about you but most of the people I know have actually taken a pay cut over the last five years. Yeah, I know some of you have been getting a bit of it back due to the good economy but few have actually recovered back to the level before the cut. Yet I digress. Let's get back to the topic at hand. I have actually covered this issue fully in a previous post titled "The Minimum Wage Isn't the Problem". I also covered this issue from the point of taxing businesses in a post titled "Tax or Not to Tax, That is the Question".

In "The Minimum Wage Isn't the Problem" I discussed the many issues that make up employment and setting the wage scale. Let me add to this by noting that artificial wage scales do more harm then good. If the cost to enter is prohibitive then few people will enter. Similarly if the cost to bring an employee up to a viable production level is too high then fewer employees will be hired. Automation and employment reduction becomes more important because the cost incentives for live bodies actually go down in comparison. A company may suddenly be willing to make that leap.
A further burden is also placed on those employees who have advanced in skill and deserve compensation for their work. I am now talking about the skilled workers who have struggled and climbed out of the lower wage scale and deserve an increase in pay. Where will a company find the money to reward these people when there purses are being robbed by an artificial wage for those of little to no value to the company?
In looking at our discussion in "Tax or Not to Tax" we noted that prices will increase when you and your competition have to deal with the same cost increases. You may remember that labor is usually the fall guy if price is not adjusted when new expenses are suddenly put on a company. So here we have a proposal that attacks labor in two ways and ultimately means an increase in the cost of the goods or services sold. It also means an increase in unemployment because fewer opportunities will be made available. Let's not forget the increased incentive for companies to automate and further increase the line at unemployment.
If all that destruction to the labor pool isn't enough let's also remember that the reason all this started in the first place was that the cost of living was too high for those who are at minimum wage. Since the result of this wonderful plan is increased cost of goods and services, no ground was gained and much was lost. Can anyone not see the doomed spiral? Will someone suggest raising the minimum wage again to fix this?
Let's start fixing how the minimum wage is used or applied as suggested in "The Minimum Wage Isn't the Problem", and quit creating more problems.

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