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July 9, 2009

Federal minimum wage increase is a kick in the gut to businesses that are already hurting

Later this month the third of three increases in the federal minimum wage will go into effect.

Businesses that depend on minimum-wage employees are already feeling the effects of the economic slowdown.  They’re already skating on the edge of profitability, and it seems that a sudden spike in labor costs may sink many businesses, or at least make it very difficult for them to hire new employees. 

To retain existing workers, employers may have no choice but to balance the increased labor costs by cutting back on hours, resulting in an empty victory for employees. 

In the current economic climate, it would be bad business to pass the increased costs to customers whose budgets are growing ever tighter.

This month’s minimum wage increase was scheduled in 2007, long before the current crisis was apparent.  How hard would it be for Congress to admit that the timing is bad, and postpone the increase until a time when the retail sector isn’t so fragile?

N.B. I’ve long been on record as opposing the very idea of a mandated minimum wage.  I haven’t wavered on that issue.  This essay is dealing with reality as it is, not reality as I wish it would be.

2 comments:

Ed said...

21 states already pay above the Federal minimum wage, and guess what? The 6 states with the highest minimum wage are also 6 of the brokest states.
Read about it, and stick around for more good content.
http://libertarianhumor.com/2009/07/10/coincidence-i-think-not/

Tim said...

Good observation, Ed.

It seems like the correlation between the two is a symptom of the more fundamental issue -- Nanny governments meddle, and their seemingly good intentions always end up outpacing the fiscal means to continue said meddling.