Published on February 2nd, 2014 | by Len Lazarick5
Rascovar column: Do-gooders know best about wages
Raising the minimum wage is all the rage among liberal Democrats and liberal advocacy groups. Listening to them it’s clear a much higher minimum will dramatically close the income inequity gap.
Nirvana is just around the corner.
All this is well intentioned. Yes, there is a widening gulf between America’s very rich and the middle and lower classes. Yes, the nation’s minimum wage needs adjustment. Those at on the bottom of American society need extra financial help.
But is the nearly 40 percent jump in the minimum wage proposed by President Obama and his wannabe successor, Maryland Gov. Martin O’Malley, the solution?
Will prosperity suddenly blossom, job-growth flourish and the poor take home enough pay to cover all expenses?
Sadly, the answer is “no.”
Indeed, a rapid and steep rise in the minimum wage may result in the Law of Unintended Consequences coming into play – fewer job opportunities, layoffs, cutbacks in hours worked, higher consumer prices and more delays in business expansion.
Small business perspective
Put yourself in the position of the small business.
The owner employs mainly low-wage workers at two or three retail locations. Wages already eat up most of her revenue. Now those wages are going to rise by over a third.
Chance are this business person will take steps to curb her new overhead – letting some workers go, reducing hours for other employees and raising prices, if competition permits.
Some small businesses may be so hard hit that they can’t stay open. Even larger operations might see profits dip substantially, forcing them to put growth plans on hold.
Negative impact from doing good
Do-gooders could end up harming the very people they seek to help.
It is encouraging that House Speaker Mike Busch and Senate President Mike Miller recognize caution is required in approaching the minimum wage issue.
One size may not fit all businesses in various parts of the state.
A $10.10 minimum rate in impoverished and isolated Garrett County goes much further than in Montgomery County, but Garrett business owners may not be able to afford such a large wage boost.
Ocean City’s part-time summer employment base attracts college students, not folks looking for full-time work. Boosting their pay by nearly 40 percent doesn’t help the poor at all. It may, though, force some small entrepreneurs to close up shop.
A better method
There’s a far better way to help men and women struggling at the bottom of the economic ladder. It’s called the earned income tax credit – a targeted wage supplement that rewards the working poor.
So why isn’t O’Malley proposing a major boost in Maryland’s earned income tax credit? Because it would require him to pay for it and cut tens of millions from other agencies and programs.
It’s far easier for O’Malley – as he has done throughout his terms as governor – to beat up on the business community and demand the private sector help the poor. It becomes a private-sector burden rather than a burden on O’Malley’s budget.
There shouldn’t be a debate over raising the minimum wage gradually over a number of years. It’s too low now.
Deceptive political mindset
But liberal politicians have seized on this issue as an easy answer to the nation’s persistent slow growth. It isn’t.
They ignore the real purpose of minimum wage jobs – to get young people starter jobs so they can learn about showing up regularly and on time, to provide supplemental wages for older folks, and to assist those whose full-time jobs don’t pay all the bills.
In most cases, these positions are not for those seeking permanent employment. They are entry-level jobs.
High turnover is expected. The work doesn’t require much brain-power. The jobs are designed to be a start or a supplement, not a career.
Cautious approach needed
Attacking income inequality is far more complicated than simply doubling or tripling the minimum wage. Attacking the business community for pointing out the obvious flaws in this liberal crusade doesn’t help matters, either.
There’s little doubt O’Malley will get a modified minimum wage proposal through the General Assembly this session. Yet a slow and cautious approach is advisable.
The next group of elected Maryland officials needs to focus more on designing programs that actually stimulate and encourage economic growth.
O’Malley and his liberal followers seem to have fallen into the political trap of calling for superficial solutions that do not come close to resolving the exceedingly knotty problems confronting society.
Read other commentaries by Barry Rascovar at www.politicalmaryland.com.