Minimum Wage and the Economy

07.28.09 | Dr. Stephen Coleman | Comments[3]


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Last Friday, workers in New York and Pennsylvania received a federally mandated minimum wage increase of ten cents an hour. This brought the minimum wage in both the Empire and Keystone States to $7.25 an hour.

The increase is bad news for a couple of reasons.

First, the increase will cut jobs in New York and Pennsylvania. You see, every increase in the minimum wage -- no matter how small -- means that payroll costs go up. That means that many businesses -- especially small businesses -- will be forced to lay off workers.

Ironically, the increase in the minimum wage means that at least some minimum wage workers will be laid off. This is unfortunate, but it is especially unfortunate when both New York and Pennsylvania already have disturbingly high unemployment rates -- with New York at 8.7 percent, and Pennsylvania at 8.2 percent.

The second reason why a higher minimum wage is bad news has to do with the cost of living. The minimum wage increase will inevitably lead to higher prices as added labor costs will sometimes be passed on to consumers. This will hurt all consumers, but especially the poor who can least afford higher prices.

Ladies and gentlemen of New York and Pennsylvania, it sounds counterintuitive...but the best stimulus plan to help the poor would be to significantly reduce the minimum wage. A decrease in the minimum wage would both protect and create jobs and would keep prices for consumers in check.


cc-wetm - tv- Dr. Coleman also airs commentaries and a public affairs program on WETM 18 Elmira. For more information on these programs, go to wetmtv.com.

Comments

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on 07.28.09 Dawn commented

I understand that thought process, but what worries me is the fact that the cost of living in PA right now is barely livable even at the newly increased minimum wage.
I have been living and working in PA for over 20 years and for most of those years I had to work 2 to 3 jobs just to make ends meet. And that was generally with the help of room-mates. None of whom could actually even afford an apartment on our own.
So I understand the immediate worry of the loss of jobs and the strain it will put on the small business owner specifically, but the reality is that the companies that can/could afford to pay more do not because they are not required to. Yet continually charge more for their products.
I feel that it is convenient to use the current economic crisis as cause for price increases but the reality is if they were to lower the minimum wage, prices still would not go down, nor would the cost of living decrease.
Problem is I don't actually have any idea what the solution would be. By the grace of God I have finally found a job that I could probably live on alone if I had to but I am now married and my husband's salary is enough to live on and mine fills in the gaps so to speak. I continually pray for those less fortunate. The irony in my mind is that if I was single; my salary is considered to below poverty level. But we want to cut minimum wage?

on 08.01.09 Josh commented

Their is truth to what this article is talking about. My family owns a farm in New York State. The minimum wage increases keep us from offering jobs to young people because the value of the the work an inexperienced new employee can do is less the the minimum wage. So we have positions that we would like to fill but we can't do so at where the level minimum wage is set without coming out even farther behind financially. The price we are paid for the milk we produce has been cut in half from a year or two ago due to the global economy down turn cutting demand for dairy product exports. We have already had to start to cutting hours people work even more because we are running out of available credit to borrow money every week to make payroll and pay our feed bill. The continual roll out of new government regulations and mandates and regulations that keep coming is slowly draining the life out of our family farm. When the government drives us out of business what good is a higher minimum wage or health insurance to our employees. When they are unemployeed they will get neither. As farmers we have no control over what we get paid. Every increased cost when we are already lossing money is a crushing blow. We are not like your local gas station we can't just raise prices if our costs go up. We wish we could pay our employees more and provide them with lots of benefits. It bothers us that we can't afford to. Some of our long term employees already get paid more than we pay ourselves. It is a unsustainable situation. If we were payed a price for our milk that covered all our costs and then some we could pay more and hire more employees so i don't have to work 80-100 hours a week. If we were paid more for our milk then it would mean a lot less profits for the processors that buy our milk and eventually you will also pay more in the grocery store. I pray often for the rapture so we can finally not have to be working so hard to suvuve and still be moveing backwards. Ronald Reagon said it best "The government isn't the solution to the problem, the goverment is the problem."

on 09.01.09 Brian G. commented

The scriptures frequently make the point of doing things with the right motive, from a heart that is right. Though it is also written that fear of God is a good place to start, following the rules and doing something because of a rule isn't as good as doing something with the right motivation... that is from a pure heart.

Simply put, I think much of the trouble is the age-old problem of greed and selfishness. And while the "more for me, less for you" mentality benefits some individuals, it hurts the vast majority of people.

It is sad that we need rules and legislation to provide minimal standards for what people get paid for doing a job. And while I agree that the minimum wage increase hits small businesses harder, I wonder how much greed play into the equation. The Forbes magazine list of the richest people in the nation no longer has any millionaires on the list. Instead, they're all billionaires. So obviously, some people are making money. But many more are not.

Many major companies are making record profits, and many of those companies continue to make even more profits by moving overseas where they can pay even lower wages. Most of these companies can easily afford to pay a living wage to worker without being mandated to do so, yet do not.

So while I sympathize with small businesses that operate on tighter margins, there are many large service and retail companies who can pay better and unfortunately will not, unless mandated to do so.

There is another side to this "lower wages equals more jobs" argument: people cannot spend money they do not have. And as our economy relies more and more on the service related industries (and less on the traditionally better paying manufacturing types of jobs) people need to partake of these services to keep them prospering. Obviously, if you work a job (or jobs) where you barely make enough to provide for basic essentials like shelter, utilities, food, clothing, it's not likely you are doing any discretionary spending to help your neighbor prosper.

The other downfall of the "low wage" mentality, is that it forces consumers to become spend-thrifts, often making essential purchases at the lowest cost national chain businesses, instead of the local business. This has the unfortunately effect of helping to put local employers out of business.

You can legislate morality, yet it doesn't mean than people will act with moral principles. It's sad that we need minimum wage legislation. And yet without it, my suspicion is that the poor would get poorer and the rich would get richer. Jobs get created out of prosperity, and the "job creation" argument against the minimum wage is a poor excuse to keep the poor in poverty.

Jesus said men's hearts are dark. And in darkness you find selfishness. Jesus also instructed us to love our neighbor as we love ourselves. Until we as a nation, start to embrace this thinking, the poor will only get poorer and the rich will only get richer. And the argument against the minimum wage only perpetuates this condition.

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