The best minds in government? If any were, business would hire them away." - 40th U.S. President Ronald Reagan (1911-2004)
I have an office at the local Burger King in my small Ohio city. Well, it's not an office in the usual sense and I show up only about twice a week. The place is very quiet at 6:30 a.m., it has Wi-Fi and the morning crew always has a cup of fresh streaming coffee on the counter when they see me coming.
Bob, the friendly 30-something manager, is likeable, a hard worker and, judging by the activity of his employees, an effective manager.
On a recent morning Bob was particularly animated. It was obvious that he was agitated about something. It didn't take long to find out what.
The previous day, U.S. Sen. Sherrod Brown (D. - Ohio), speaking at a bookstore in a nearby city, laid out his case for the Fair Minimum Wage Act of 2013. That Act, if approved by Congress (and it looks like it's a cinch to pass), would gradually raise the federal minimum wage from $7.25 to $10.10 an hour. Senator Brown told the audience at the bookstore that it was necessary to help low-income people. As far as he could see, there'd be no downside to raising the minimum wage.
"No reasonable study shows that it costs jobs," he said.
That particular remark puzzled my friend Bob. He and his fast-food competitors in our small city pay the same hourly wage to cooks and counter workers - the State of Ohio's minimum wage of $7.85 an hour. It's Bob's job to know what his competitors pay their employees. It's also his job (literally) to make sure his store meets the revenue targets established by its owner. You can see where I'm going with this.
Something's got to give
Bob says that if he has to raise his workers' hourly rate to $10.10 that something's got to go - some of his employees probably. Certainly $7.85 is not a living wage, he concedes, but it's better than nothing. That's what a lot people are going to get if they lose their jobs because their employers, not able to cut costs to make up for the higher wages, will have to cut them loose.
What Bob's telling me makes sense to me. It's Econ 101. It also seems logical to extrapolate that if fast-food restaurants and other small businesses are forced to start paying workers $10.10 an hour that landscape companies are going to have to raise the hourly wages they pay, too, even though most landscape workers are already making more than the hourly minimum. At least the ones that I know in Ohio are.
And, obviously, raising the federal minimum wage affects more than just Ohio, because even though each state controls its own state minimum wage requirements, the federal minimum wage law supersedes state laws where the federal minimum is greater.
As it stands:
- 19 states (plus Washington, D.C.) have minimum wage rates higher than today's $7.25 an hour federal minimum wage, including some of those in the next column.
- 10 states (including Ohio) have minimum wages linked to the consumer price index, which means that the minimum wage rises as the CPI rises.
- 21 states have a minimum that's the same as the federal requirement of $7.25.
- 4 states have minimum wages below $7.25 hour.
- 5 states do not have minimum wage requirements.
The U.S. Chamber of Commerce opposes raising the federal minimum wage. It says the increase could hurt small business owners. In a recent news release, it expressed concern that businesses might have to trim profit margins to keep up with the increased cost of labor. That's pretty much what it says every time the feds raise the minimum wage requirements, which is every couple of years, it seems.
But, judging from what I've been able to read about the issue to this point, even some prominent business leaders have publicly stated that raising the minimum wage is a good idea. Cynic that I am, I suspect they realize that the legislation is a done deal and it's a good opportunity to burnish their public images. They must realize the Faustian bargain they're party to.
Don't get me wrong. I'm sure we all agree that every working person deserves to be fairly compensated for the value that their efforts produce - whether it's for their employers, their customers or for society, in general. What's wrong and economically ruinous in the long run is "fed-creep" into private enterprise. Essentially, what the feds are saying is that business owners, competing in a free market, are unwilling (incapable?) of paying their employees fairly. For that reason, business owners must pay their employees (or at least the least experienced/least skilled) what the government says is appropriate. Government knows best. Consider how wrong-minded that is.
But, back to the issue of the Fair Minimum Wage Act of 2013.
I don't pretend to be an economist, but it seems to me if employers are forced to pay workers 15 to 20 percent more per hour, that business owners will have to pass on the extra expense to customers, let some employees go (and count on the survivors to pick up the slack) or lower their profit expectations. The first two options would appear to be more acceptable to owners than the last one.
The bigger point though, and one that few Americans probably even consider, is that the feds cannot legislate away poverty. They don't have the ability to do it. Our system doesn't work that way. Government can never boost the federal minimum wage high enough to solve the problem. That hasn't changed from 1938, from the first federal minimum wage requirement ($0.25 an hour) requirements, to today - and it never will.
To comment, contact Ron at