Editorial: What are the costs of raising the minimum wage?

Jan. 29, 2014 @ 11:41 PM

On the surface, who wouldn’t want employers to pay a “living wage?”

Don’t most people want the best for everyone? Why shouldn’t the minimum wage be raised to $10.10, as President Obama mandated for federal employees and contractors Tuesday night? After all, minimum wage workers deserve a living too.

It’s easy to support something popular, especially for something that sounds like it would benefit struggling people. According to Gallop polls late last year more than 70 percent of Americans support raising the minimum wage. But how many of those truly think of the possible negatives of such legislation?

As we’ve seen, there can be unintended consequences when additional costs are forced onto business by the government. Countless worker had their jobs cut below 30 hours a week to avoid the Affordable Care Act’s mandate. Several large-scale employers across the country have also cut insurance plans for part-time workers to help cover the costs they’re facing from the new laws.

A similar effect will be felt if wage increases are forced on businesses during a recession.

Could you imagine businesses in our tourism-based economy — which already run bare-bones staffs during the slow time of the year — being required to increase those workers’ salaries during a recession? That’s not to mention what would happen to the many workers already making $10-15 hourly. What would they expect, given less-skilled workers were now making at or just below their hourly earnings? It’s easy to guess that many small businesses wouldn’t survive.

Those who did would have to raise their prices, let some employees go (or cut their hours), or some combination of the two. Unlike the government, business cannot print their own money or enjoy an unlimited line of credit. Instead, businesses will have to tighten their belts while everyone pays more for goods and services, getting less than they did before in the process.

Unskilled, young workers — or someone out of work and looking to get back on track—need access to entry level jobs to just get on the first rung of the economic ladder in order to learn skills, build a resume, and move up to something better. Is it right to deny someone the right to start a career—or get a desperately needed second job — if he’s willing to work for less than what the law demands? 

We’re often asked to look to Europe as an example when it comes to healthcare. Perhaps we should look to Europe as well when it comes to wages.

The progressive European workforce has higher youth (ages 15-24) unemployment than this country, according to an article published last year by The Economist.  European contemporaries France, Britain, Greece and Spain all had higher youth unemployment than the U.S.

In fact, only Germany — which has no statutory minimum wage — had a lower youth unemployment rate than the U.S. It seems, however, after dealing with pressure from other European nations which claim its got an unfair edge for exporting through cheap labor, the Germans may soon set a minimum standard. 

So, while it’s easy for the heart to believe paying a higher minimum wage is more humane, it is an irrefutable law of economics that when the price of something goes up, you can’t buy as much of it as you did before. Making jobs more expensive for businesses to create is counterproductive when so many are looking for work of any kind.

But it appears to be coming, whether Congress supports it or not.