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Thursday, July 24, 2014

Debate on miminum wage has just begun

Wednesday, May 3, 2006

It looks as if a proposal to increase the minimum wage in Missouri will be on the November election ballot and, as usual, business and labor are at odds over the merits and impact on the wage increase. Regardless of where you stand on the issue, petitions are currently being circulated to place the question on the November general election ballot. It's likely the supporters will get enough signatures.

If placed on the ballot and then approved, Missouri's minimum wage would jump from the current federal floor of $5.15 to $6.50 an hour. That rate would also increase each year to keep pace with the cost of living.

The usual suspects are obvious. Democrats, labor unions and advocates for the poor are solidly behind the minimum wage increase. Republicans and business groups stand opposed. There are currently 20 states that have a minimum wage on the state level higher than the federal rate.

The question of a minimum wage is one of those issues that can be argued either way. Here are the arguments.

Something is wrong when an individual can work full time for minimum wage and still fall below the federal poverty guidelines. It has been almost 10 years since the federal minimum wage was raised to its current level. Most workers on the minimum wage are younger workers just entering the work force. But some, however, are heads of family with limited job skills who are trying their best to support families on $5.15 an hour. That is a difficult if not impossible task.

But business has an equally compelling argument. If business operators are forced to increase their starting salaries, then they will also be forced to increase the salaries of other workers. Everyone understands that an employee who has been working for a couple of years cannot be paid less than a starting worker. So the minimum wage increase in reality starts a chain reaction that jumps the labor costs to all business.

The one issue that everyone must accept is that many, many businesses operate on the edge of profitability each and every day. The headlines about the huge profits by oil companies or Wal-mart do not apply to most businesses. The fact is that many businesses are just a bad month away from being out of business. So what will the minimum wage increase mean to them?

My guess is that most businesses will still spend the same on wages regardless of the minimum wage scale. In other words, if forced to raise their wages, most businesses will find ways to conduct their operation with fewer people. So hiking the minimum wage is truly a two-edged sword. On the one hand, it will benefit those at that wage scale. But on the other hand, it may mean less people can find jobs because business may well reduce their work force to absorb the higher wages.

If the petition drive is successful, there will be ample discussion on this issue between now and November. But I suspect the arguments will change little in that time.



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Michael Jensen
Michael Jensen