spacebawl (the blog)

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Saturday, January 13, 2007

Thoughts on the minimum wage increase

Being the bleeding heart dirty fucking hippy (BHDFH) I am, it should come as no surprise that I strongly support the long-overdue minimum wage increase passed by the House on Wednesday. The legislation now faces a tight Senate vote and a possible Presidential veto unless amendments are attached to lessen the added burden on small businesses, which tend to have larger percentages of low-wage employees. Senate Majority Leader Harry Reid has already signalled he and the Senate Democrats would be amenable to such changes. (Note to Mitch McConnell: this is what bipartisan cooperation looks like.)

In addition to being a BHDFH, however, I'm also a realist and a pragmatist. I'm well aware that a minimum wage increase is not going to solve the country's problems as far as income disparity and poverty are concerned. In fact, it could create some unintended problems for the very people it's supposed to help, as shown in this fascinating WaPo article, Life at $7.25 an hour. But overall, the increase is a good start. The current MW of $5.15 an hour, adjusted for inflation, is at its lowest level since 1955. By way of comparison, if MW increases had risen by the same factor as executive salaries, it would be over $23 by now. A small, if good, start.

But what of the impact on small businesses that the Republicans are so concerned about? I happened to catch a panel of small business owners speaking on just that topic before a Congressional committee, arguing in favor of tax incentives to offset the wage increase. They discussed how the increase would require them to cut overall employee hours rather than raise prices on their products, because they already lose too much business to big corporate retailers who benefit from volume buying. Their share of employee taxes and health insurance would increase as well. They gave other reasons they felt they deserved tax breaks, such as the fact that small businesses usually lease the buildings they're in while the big retailers own theirs, putting the former at the mercy of the landlord who raises rent, won't make repairs and improvements, etc. (On a somewhat humorous note, one of the businessmen ran a store called "Bob's Soda and Pet City" or something like that. I'm quite curious as to their shelving and product placement. But I digress.)

While I'm sympathetic to these problems, it's important to understand that not all of them are really related to the minimum wage. Employee wage, tax, and insurance increases, sure. But if I correctly recall my tax studies and years of experience in corporate accounting, wages and insurance are deductible expenses, so they're removed before income tax is calculated. In addition, we have an even more compelling argument in favor of a single-payer national health plan - to take that burden off small and big business alike.

The other issues the panel brought up really don't have anything to do with employee salaries; rather, they're the unfortunate results of our corporate-influenced government favoring megacorporations over small scale entrepreneurs. To that end, I agree with incentives for small businesses in order to level the playing field and give consumers more choices than just a Wal-Mart at one end of town and a Target at the other. Ideally, such incentives should not be attached to a minimum wage bill, as the two issues don't relate to each other. But politics being what it is, one must sometimes make concessions to get what one really wants, and in my opinion the Democrats are wise to allow the small business concessions in order for the minimum wage to pass. The net effect is positive.

As far as cutting employee hours to avoid raising prices (and theoretically losing business because of it), I find that argument specious. All kinds of things affect the price of consumer goods, but we don't hear too much whining that the government should do something about the increasing cost of fuel, which in turn raises the price of grapes imported from Chile. Grocery stores just raise the price of grapes, and hardly anyone notices. Inflation in general causes prices to increase, and most retailers deal with it by small increases on various goods to compensate. On top of that, from the way some of these businessmen talked, you'd think that they were faced with the horrible disaster of drastically increasing the pay for every single employee they had. All I could think was, dude, if you have never given your employees wage increases and they are all currently making only $5.15 an hour, you are just one shitty mofo boss.

The sad fact remains, though, that human capital is typically the first to be threatened as the sacrificial lamb when businesses are faced with legislation that could impact their bottom line. It's just one of many swords of Damocles the powerful use to keep things going their way. I find this depressingly ironic, since I usually choose to patronize a small business where I know there are more staff people available to assist me and the building isn't so huge that I'd spend far more time finding the stuff I need than it took to get to the store and back, even if it means I pay a buck or two more for merchandise. I fear I'm in the minority, though, since I don't allow "always low prices" to be the sole arbiter of my purchasing decisions. There are some things worth paying extra for: the time I save by shopping at a small store and not waiting in long checkout lines; the gas I save by going to a place closer to home (especially when I can walk or bike); the expertise and assistance I can access by being easily able to find a salesperson. Rather than considering a small business "more expensive" because its prices have to reflect these things, I consider them essential benefits which are worth my money. It would behoove us all to consider our shopping habits in this light.


Anonymous Anonymous said...

The other way to look at the minimum wage, since it is directly helping so few people, is the huge benefits it gives to Unions. With many union contracts tied to the minimum wage, Union workers everywhere get a raise with its passage. The Federal Government is also a big recipient of this sort of reverse welfare, by adding anice sized percentage of the increase in additional payroll taxes...

So, it may not help the poor directly but money is nonetheless being redistributed.

9:39 PM, January 26, 2007  

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