Political Radar

Wage war

March 26th, 2013

The National Federation of Independent Business, the small business advocacy group, will mobilize on Wednesday against a minimum wage increase.

The House Finance Committee is taking up a minimum wage bill Wednesday afternoon. There appears to be consensus among House and Senate leaders -- and President Barack Obama and Gov. Neil Abercrombie -- that a minimum wage increase is overdue. Hawaii has not increased the minimum wage since 2007.

But Melissa Pavlicek, the NFIB's state director, said in a statement that small businesses are still recovering from the recession.

Big corporations are starting to climb out of the recession, but small business has failed to recover because of a series of federal and state policies and proposals like SB 331. It should be called the Don’t-Hire-In-Hawaii bill, if accuracy means anything to the Legislature.

Big corporations do not have to absorb the cost of minimum wage increases because most minimum-wage jobs are offered by small businesses. The minimum wage directly affects small businesses because a large amount of their earnings go directly to pay for operating expenses, such as equipment, supplies, lease or mortgage, credit lines, inventory and employee wages and benefits. And, it’s vital to underscore that the vast majority of minimum-wage earners are young adults beginning their first jobs, those working a second job to make a little extra income, and some seniors looking for part-time work to augment their Social Security. They are the ones hurt most by minimum-wage increases, because employers must start with cutbacks of them.

4 Responses to “Wage war”

  1. Sayer:

    This a tough call. Small businesses do provide the most jobs and as a small business owner, you really have to look at every penny when creating jobs. It seems it would be best for the economy to recover some more before legislating this, though I do sympathize with people stuck in minimum wage jobs. Just seems better to have a slightly lower paying job than to risk having no jobs at all for some people at this stage of the game.

  2. Manoa Kahuna:

    There just isn’t any evidence that raising the minimum wage near current levels would reduce employment. And this is a really solid result, because there have been a lot of studies. We can argue about exactly why the simple Econ 101 story doesn’t seem to work, but it clearly doesn’t — which means that the supposed cost in terms of employment from seeking to raise low-wage workers’ earnings is a myth.

    These results don’t mean that no worker ever loses her job when the minimum wage goes up. But they do mean that the vast majority get a raise and that anyone blithely citing the classical model, as Melissa Pavlicek did, is speaking from prejudice, not from the evidence.

  3. Kolea:

    Manoa Kahuna makes a very good point, which deserves extra attention. As I recall, there have been studies done of locales which raise the minimum wage and it does NOT result in a rise in unemployment. Yes, a small number of marginal small businesses may go out of business, but the rise in purchasing power for those receiving the minimum wage is significant enough to generate more business in places where they shop. A $1 raise for an employee earning $7.25 amounts to a 14% raise, allowing them to buy more things, much of it from other small businesses, which in turn, creates enough jobs to offset the few jobs which are lost.

    The reality of the business world is that employers feel strong downward pressures to restrict wages. Even if they might WANT to pay their employees more, the competitive pressures they face do not allow for them to do so. But when the law forces their competitors to pay their employees more, that disincentive vanishes. And not all small businesses SHOULD survive. Not if they cannot pay their employees a decent wage. If the classical economic model were given complete free rein, employers would seek to get away with paying their employees less and less, with few benefits. This is especially true for unskilled or low-skilled employees during a time of relatively high unemployment. (And the old days of low unemployment of 2, 3, or 4% are long gone).

  4. Especially Incognito:

    Less money made by stock holders and CEOs.
    Unions getting a piece of the pie.
    Unions pulling strings.

    Still a comment is two cents but some think
    theirs is valued more.

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