There has been a lot of push back on raising the minimum wage from the current $7.25 per hour to something quite a bit higher. I am not sure what that new number should be, but I want to make a case for this increase and that almost everyone in our economic system will benefit.
First of all, let me get some of the misconceptions of this issue out of the way. The biggest complaint is increasing the minimum will create a decrease in employment. (I grew up in an age of $1.25 per hour about 50 years ago, and with the increase to today’s rate, we have not seen any major unemployment, except tied to the overall economy.)
The idea goes that if an employer has to pay more labor costs, it will make the business noncompetitive, and it will go out of business. This is exactly why it must be a universal wage increase. All businesses compete for the customer’s dollar, and they compete with other businesses offering the same service or product. A universal increase does not change the competitive equation. All the employer’s competitors have the same new wage.
This is why it cannot rely on individual employers to raise their wages, when that puts them at a distinct disadvantage with their competitors. It has to be an even playing field for all.
Another big resistance is that an increase will raise prices and drive away customers. Wages are one factor in the cost of making a product or delivering a service, and the increase of one factor does not correlate directly to higher prices. Yes, there may be some increases, but there will be more money in the consumers’ hands and should easily compensate for any of the price increases.
When minimum wage is increased, it pushes all wages up. This increase in wages, in the hands of people who tend to spend almost all of their disposable income, creates what is sometimes called the “acceleration of money.” Meaning that, as people spend more, more is bought, more has to be produced, more has to be paid in wages, and the cycle continues. This creates more employment, not less. (It is what Henry Ford figured out when he dramatically raised wages about 100 years ago.)
So, we have more money moving in the economy to create more demand, and at the same time we put pressure on all wages/salaries to be increased. Creating more demand. There is some risk of inflation at this point. In other words, as people are paid more at every level, it can be passed on as price increases, and that is what creates inflation. But if inflation increases at a lower level than wages, it is beneficial. Today we have low inflation and no wage increases.
We also have the argument that we are paying too much for unskilled labor. This is “entry level” is the argument. And yes, there must always be entry level people with limited skills, and this is true of college-educated people. You bring people in to develop them to be an addition to the work you are doing.
To assume that “entry” means several years of work is demeaning to people of all ages. I remember learning from day one to be better at what I was asked to do. Some say that “kids today” do not have that work ethic, and maybe some do not, but I think it is also a function of where they go to work.
Finally, this is the lamest argument of all. If an employer has 10 employees and has to pay more, he can only afford to pay eight or nine and will lay off the extra employee. If you can do your business with only eight to nine people, why are you employing 10? This flies in the face of that “business is to make money.” But this brings me to my most important point.
I think a low minimum wage makes for lazy management. When employees are paid at such a low rate, managers tend to think of them as expendable and therefore easily replaced. (Ignoring the cost of recruiting and training.) There is no effort to look at how the work is done and how to engage and train those employees in helping to improve things.
It used to be that minimum wage was for high school kids who would not stay for more than a few months. That has changed dramatically today. But even that idea, that employees are interchangeable, non-thinking and merely mindless cogs in the wheel of production, is bad management.
I remember a janitor at Cummins who, after going through some training on improvement methods, managed to take hours off his daily work of cleaning up. I had to battle management that wanted to lay off the extra janitors not needed by adopting these methods, instead of using this new skill in other areas. It is the small-minded management that only sees costs and does not see how to use people as ways to increase the value offered to customers.
That is how you compete well in the business world. Your people add more value than your competitors. With an increase in the minimum wage, we will hopefully push more managers into rethinking how they use people.
And using our human workforce in more productive ways is a benefit to all of us. We the consumer get better products and services, we the worker get more income, and we the society benefit with higher productivity and more for our purchasing dollar.
Columbus retiree Tom Lane served as a consultant to a number of companies in his career. In recent years his has been a familiar name to readers of The Republic’s Letters to the Editor section. He can be reached at firstname.lastname@example.org.