From: Tom Lane
I must take issue with Mr. Abdul Hakim-Shabazz’s column on minimum wage increases in the April 24 Republic. He tries to make the point against a rise in the minimum that recently passed in New Jersey.
His contention was one of three things would happen:
- Raise prices to customers
- Lay off people or reduce hours
- Take less profit
He makes his case that the second option is the only viable one and it will hurt employment. Very misleading thinking on his part.
The first issue of raising prices to compensate for higher wages makes it sound like only one business has this new wage placed on them. Everyone gets the new minimum, so maybe, and I mean maybe, prices will go up, but so will the prices for all the competitors, so the customer may have to pay more if they continue to desire the product or service.
The third issue is the only one I would agree with, and that is the owner will not likely take a cut in profit. Some do not make a huge profit, so there may not be much to give.
The second issue is the one with the great misrepresentation. Smart business people hire just enough people to cover the demand from customers. To cut hours or lay off means that their customer’s product or service will suffer. If they have too many people, then that should be addressed regardless of wage level. Businesses lay off when demand goes down and hire when it goes up. It is a different issue.
The biggest missing approach, which should always be the first one, is to involve employees in making productivity improvements. This lets you produce more with less time and effort. And, in contradiction to Mr. Hakim-Shabazz’s idea that “flipping burgers and mopping floors” is a low-skill job, the ability to make improvements is something everyone can learn to do. And that added skill should be rewarded to take the employees above the minimum wage, since it makes the whole business more competitive.
One final note on basic accounting. Recently a politician claimed that raising the minimum wage would lead to $20 hamburgers. (They love the hamburger analogy.) Wages are only one part of the total cost input for a product or service. A couple dollar an hour wage increase does not equate to a couple dollar increase in cost to the customer. In some businesses, labor cost is a very minor part of overall cost.
Finally, the minimum is the baseline so the supply and demand for labor does not drive wages to zero in bad times. No one wants to, or can live on, the minimum, but it is a good base and needs to be raised. Mr. Hakim-Shabazz should stick to law and stay out of business.