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Berginski: Don’t sharply raise minimum wage

By Staff | Jan 31, 2014

Before giving the State of Union address on Tuesday, President Barack Obama announced that he would raise the minimum wage for federally employed contractors. In his address, he also said there was a Democratic proposal to raise the federal minimum wage to $10.10 per hour, and that companies, small businesses, state and local governments should act now rather than wait for Congress.

Currently, the federal minimum wage is set at $7.25 per hour, although some states and occupations pay more than that. Economists do agree that, when adjusted for inflation, the minimum wage today is worth 23 percent less than it was worth in 1968. As mentioned in an article on CBSNews.com, if the minimum wage kept up with inflation and growth in productivity, it would’ve been at $25 per hour by now.

Supporters say that raising the minimum wage would give those who work in those occupations more purchasing and spending power. A full-time minimum wage worker making $15,000 a year would see a bump in pay to $21,000 a year.

The move addresses one of our nation’s biggest problems, income inequality. But it isn’t a solution, and it may only make more problems.

One of the problems it may create is job dissatisfaction. Say, for example, I work in a profession that pays me $15 per hour, and I’ve been working for quite a while to get to that point. Now, the Federal government has raised the minimum wage to $15 an hour, and a bunch of people who’ve never been in the workforce before start applying and get hired. As an employee of said business, we’ll call it ACME for the time being, I would be upset. Why should someone just starting out make the same amount as I do and I’ve been employed there for years? In that hypothetical situation I would ask for a raise, but….

Another would be the businesses’ ability to pay for things. ACME, continuing with the above scenario, has quite a bit of overhead-payroll, water, electricity, yearly and quarterly taxes, rent, materials, etc. In order to pay its new employees, or even give raises to its long-standing employees, and still be a profitable business, something will have to give. More than likely, ACME would have to raise its prices for the goods and services it produces. If ACME was a big business it could probably stay afloat, but it’s not. It’s a small business with an established regular customer base. Those regular customers could be upset that ACME raised its prices, a move that runs the risk of losing business. Loss of customers could mean inability to pay employees and bills, which could mean that ACME would have to close forever.

If small businesses were to close their doors for good, it would worsen our nation’s unemployment rate. Some of the bigger businesses would also see outsourcing of production of goods and services as an even more attractive prospect, which would would also hurt our nation’s unemployment rate. The poor would still be poor, and the working class would be hurting, probably even worse than they are right now.

A drastic minimum wage hike in an economy that is slowly rebounding is a horrible idea. Minimum wage should be raised gradually, adjusted for inflation, state of the economy, and state of the workforce.

Speaking of the workforce, Congress should also raise the issue of “mal-employment”-college graduates who have to get jobs in minimum-wage professions because they can’t get jobs in the fields they studied. Why are they mal-employed? Why are some not working? What can be done to fix it? Those are questions we should be asking, not whether or not we should sharply raise the minimum wage.

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