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As Long as We Remember...

December 5, 2013

Stop Digging When In A Hole

Chris Cavey

What is a "minimum wage?" Is it an amount, which sustains a family above federal poverty levels? Is it what you pay a 15-year old to mow lawn or cashier at the local grocery store? Is it really a factor in our economy or just a "political maneuver?"


It appears the discussion will soon unfold once again in Annapolis.


Del. Alisha Braveboy, of Prince George’s County, intends to sponsor such a bill in the 2014 General Assembly session. She claims the undue burden on businesses in Maryland is unwarranted. She apparently insists people will still hire and business will continue unscathed. She is quoted as saying: “Similar arguments have always been made and guess what, the sky will not fall."


Well, two out of three ain't bad. The sky will not fall and sharp-penciled savvy business people will continue to hire and grow their businesses. These businesses will continue to remain viable because they understand that increased expenses (including items like the rain tax) are passed through to the end user – people like you and me!


A raise in the minimum wage is like throwing another log on the fire of rising cost and economic inflation. The cost of goods and services will proportionally increase and – within a few short years – we will be in about the same spot mathematically or perhaps worse off. The minimum wage earner will still be on the short end of the economic stick.


Perhaps it is because we have too broad a definition of what minimum wage actually should be. Is our goal to help families who are at or below the poverty level? If so, then the argument might be that minimum wage should be much higher. No one can truthfully believe a single income earner can support a family of four on $20,200 per year. ($10.10 X 2000 hours). Yet few people really think the grocery store is getting value paying baggers at a $10.10 hourly rate.


Historically there is little to no evidence to support an increase in minimum wage accomplishing much. Frankly, there are studies that show that higher wages offered to high school students tend to increase the dropout rate among students struggling with school and earning poor grades. They are actually enticed by the cash! After all $20,200 is a big temptation to a 17 year old with a girlfriend and car payments.


So, that leaves a political maneuver…


I have no doubt Delegate Braveboy is sincere in her desire to help society. I have no doubt that she is reflecting what she perceives as the will and desire of her constituency. But, has she thought about the long term effect or overall economic impact on all consumers in Maryland? Does she understand the additional cost of goods and services to those wage earners might end up to be a net loss of spendable dollars?


The Economic Policy Institute has a chart of minimum wage from 1938 through 2009 showing the real value of minimum wages adjusted to 2009 values of the dollar. Even with 19 raises in the minimum wage, earners were better off in 1968 than any other time since…and it was the only time those wage earners were above the poverty level.


Increasing the minimum wage is an excellent way to capture votes from many population demographics. It is easy to sell a raise to almost anyone. It makes you look and feel benevolent. It may even be a part of the overall poverty solution – but it is not the solution.


Delegate Braveboy and those who support such a mandate need to also concentrate on solving other economic issues. They need to reign in state spending. They need to cut unnecessary and out-dated programs. They need to cut taxes to businesses and create a business friendly atmosphere in Maryland.


I contend that if costly state regulations, unfunded mandates and tax rates were cut to Maryland businesses, a decent minimum wage could be established and inflationary consumer costs could be avoided.


Until the ledger is balanced, the good delegate from Prince George’s County and her cronies are just ratcheting up the problem and keeping those who need help most in a financially breakeven position while simultaneously costing the rest of us more.


The sky isn't falling – the hole is being dug deeper.


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