Employees and consumers will pay for hike in minimum wage [Letter]

Letter to the editor

March 05, 2014

After reading the typical one-sided, liberal argument for minimum wage increase ("Economy flourishes when wages go up," Catonsville Times, Feb. 26), I cannot resist commenting.

The writer uses the usual point of social injustice because those earning minimum wages are not making a so-called "decent" living wage.

Whether raising the minimum wage causes job losses or job gains is long a point of debate among economists. But from where does this extra wage increase come?

President Barack Obama says business owners should take lower profits. Oh, that is a brilliant strategy!

Some facts are in order. Businesses are not established to hire employees. They provide a product or service in the most cost effective manner to generate an acceptable return on their investments in capital and time. If successful and demand for the products/services merits it, they will hire and expand the business.

Business generally operates within the dynamics of supply and demand. If a business cannot find labor at the wage owners want to pay, then the market will set the wage rate.

Arbitrarily raising the minimum wage (a revaluation of labor's worth) by a government entity circumvents market forces.

There has to be ramifications. In order to maintain profit margins, a business owner will either have to try to get more output from fewer employees, raise prices that can negatively affect demand or perhaps move to a more friendly economic climate.

The idea that Maryland is business friendly is contrary to practically every survey conducted.

What happens to the employee who already makes the proposed minimum wage, who is presumably paid because his/her labor is valued more than the prevailing minimum wage?

The likely effect will be that employee's wage rate will be boosted above the new minimum wage.

There will be a cascading effect up the wage ladder, which is too often forgotten, even by some economists. The costs of doing business will increase.

I experienced that result back in the 60s, when the minimum wage was raised from $1 to $1.25 per hour. There is no reason to believe it won't happen again.

Most likely the minimum wage will be raised because that is the way the wind is blowing, with "income inequality" as the president's new buzz words.

Michael Ernest Sr.

Catonsville

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