Monday, February 18, 2013

Hard to float without a life vest


Last month, New York State Governor Andrew Cuomo suggested increasing the minimum wage from $7.25 an hour to $8.75. Not to be outdone, in his State of the Union address, President Barack Obama suggested increasing the federal minimum wage from $7.25 an hour to $9 an hour and then indexing it to inflation.

Both men’s plans have been met with significant opposition from the Republican Party and small businesses, who claim that either plan would lead to higher business costs and result in higher unemployment.

It’s hard to argue that higher costs would ensue. Most companies’ highest expense is labor and benefits — and an increase of nearly 25 percent in their highest cost certainly wouldn’t help them.

That said, Cuomo and Obama have both made the point — and accurately so — that you can’t live on minimum wage. Someone working one minimum wage job at 40 hours a week makes $15,080 a year. That is — believe it or not — nearly $4,000 over the federal “poverty line.” If that person is married or has a child, (s)he makes less than the poverty level.

The oft-used argument, of course, is that minimum wage isn’t meant to support a family. Minimum wage jobs are supposed to go to high school kids and whatnot. Which makes sense to me. A 16-year-old can get by making $150 a week or whatever. Their parents pay the rent and electricity and major bills anyway.

That would be all well and good if mom and/or dad had their own good-paying jobs. But there seem to be less and less good paying jobs all the time. And the less good-paying jobs there are, the more companies dial down their wages and make what used to be $12- or $9-an-hour jobs into $7.25-an-hour jobs. Now 40-somethings who used to make a good living are competing with high school kids — just hoping to put food on their tables (or on their families, to quote President George W. Bush).

To make ends meet, people take two of those minimum wage jobs. Or three. Which, of course, leaves less jobs available for others to take, resulting in higher unemployment — and underemployment.

As those $12-an-hour jobs evaporate, people at the next tier — making $15-$20 an hour — see their wages drop as well. It’s “trickled-on economics.”

Typically, I’m in favor of telling government to keep out of our lives — including our businesses. Theoretically, I’d like to say, “If people are willing to work for $5 an hour, then so be it.” The problem with that, however, is that there are times when the balance of power shifts significantly away from the people and we end up being the equivalent of indentured servants. In my opinion that’s when government needs to step in.

Yes, raising the minimum wage will lead to higher costs for businesses. But what do businesses think people are going to do with that extra $70 a week? They’re going to spend it. Every penny of it. And that’s going to put that money back into those business owners’ pockets. And hopefully that rising tide will float all boats.

Scott Leffler made minimum wage once. He was grossly overpaid. Follow him on Twitter @scottleffler.