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Friday, June 26, 2015

$15 per hour - Climbing the ladder to unemployment

by 12th District Representative Cary Condotta

Some lawmakers in Olympia this session want to change the minimum wage law. Unfortunately, they can no more change this law, than the laws of physics or economics. In short, the market will prevail and supply and demand will not be manipulated in the long term even if it sounds good on paper.

Those that support increasing the minimum wage do so under the false pretense that people will make more money, therefore spend more money and stimulate the economy in the process. They tell you it will lead to no change in employment numbers and may actually increase jobs. And last but not least, proponents claim this will decrease the disparity between rich and poor. Once again this flies in the face of economic law that has stood the test of time and will likely continue to do so indefinitely, or until we invent the perpetual motion machine.

The facts are these - unemployment, especially youth unemployment will rise. We already have one of the highest youth unemployment rates in the country.

You won’t see any increase in economic activity because no new money is created. For every dollar you add here it has to be removed from somewhere else. And once again, if you increase the cost of something the demand generally decreases. If we raise the price of gasoline by 30 to 40 percent do we buy more?

As far as closing the gap between the rich and the poor, Washington state is a perfect example. We have the highest minimum wage already but our state is not even in the top fifteen states in the nation in addressing income inequality. If a high minimum wage really addressed this issue wouldn’t our state be ranked higher?

Don’t forget an increase in the minimum wage would push all wages up not just the bottom wages. So, if the current minimum wage is about $9.50 and someone is making $11.50, what happens when the $9.50 goes to $12 an hour? To be fair, it would follow that the $11.50 would have to go to $14. This continues up the so-called “ladder” indefinitely creating an instant inflationary effect. In this case, the product most inflated is food products since it is a wage intensive industry. How does this help our fixed income folks?

This also effects the cost of government, specifically labor costs. As the wage ladder ripples through government labor costs it could mean huge tax increases will have to be levied to pay for it. With the most regressive tax system in the United States, those tax increases will hit lower income folks at four to five times harder than the high-income earners.

The result of an increase in the minimum wage is and has been higher costs, lower employment and more wage disparity. We are our own best example. Are there beneficiaries to this policy? Yes, large corporations and conglomerates that can spread the cost and afford mechanization forcing their smaller competitors out of business. So, it is great for the rich and their corporations, but bad for most people in general and small businesses. With an increase in the minimum wage small employers will likely postpone hiring, cut benefits, look to automation, raise the price of their product to cover labor costs or possibly close their doors. So, perhaps it is best we put the “wage ladder” away before we fall from it.

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