Opposing Viewpoints – Higher minimum wage will hurt businesses, reduce jobs

The Senate is continuing the debate over increasing the federal minimum wage from its current rate of $5.15 an hour to $7.25 an hour. With the House approving its version on Jan. 10, and the tentative endorsement of President Bush, the Senate?s vote on a minimum wage spike appears contingent on a few ?sweeteners? such as tax breaks for businesses to entice additional Republican votes.

Nevertheless, if it?s the working poor our senators intend help, they should do everything they can to stop the minimum wage hike in its tracks. An increase in the minimum wage promises to be ruinous for precisely those Americans it supposedly helps.

The economic flaws of a minimum wage hike are vast and destructive. By raising the costs of hiring and retaining employees, an increased minimum wage drives up costs for businesses, leaving two options for employers.

First, business owners may choose to pass the increased costs to their customers, driving up the price of everything from baby food to work boots and offsetting any increased spending power for America?s working poor.

Second, business owners can decide to reduce the cost of employees by having fewer of them. This means firing the least productive, least skilled workers. You don?t have to be an economist to understand these are the same workers who are likely earning the minimum wage.

Americans can only hope that lawmakers are strong enough to withstand lobbying pressure from unions and show the economic commonsense needed to reject a minimum wage hike. If our leaders in Congress want to show compassion for working poor, they should make sure that as many Americans as possible have the opportunity to work for a living. Nothing can provide that opportunity as easily as rejecting an increase in the minimum wage.

Troy Senik is a research fellow at the Tennessee Center for Policy Research, an independent, nonprofit research organization. Web site: www.tennesseepolicy.org.