Unexpectedly Intriguing!
30 March 2005

Warren Meyer at the Coyote Blog has one of the single best descriptions of the options available to a small business owner in coping with the effects of an increase in the minimum wage upon their business that I've seen. It's a must-read for anyone living where a proposal to increase the minimum wage is on the table and who wants to understand the potential consequences of taking this action - especially if future increases may be linked to the cost-of-living index.

Aside from the link between the wage levels and employment levels itself, what I find unique in the debate about minimum wage levels is that as a society, we are very willing to place a disproportionate share of the negative consequences of increasing the minimum wage upon the youngest workers as well as upon the oldest, where both groups must bear the burden of increases in the cost of labor by being the most likely to be unemployed, all for the "benefit" of society as a whole.

Although one could argue that Warren's business is unique in that it primarily employs people above retirement age, who also receive income from Social Security, pensions, investments and other sources and would otherwise be unaffected, the same argument could be made of teenage and other entry-level workers who may fall back upon the resources of their families. While the "Mom-and-Dad" safety net lessens the direct impact of the minimum wage increase to the younger worker, it instead transfers the true cost of the increase to their parents, who frequently find themselves having to sustain their expenses in providing life's necessities to their offspring for a prolonged period of time, until opportunities in the entry-level job market allow their child to enter the workforce. [Editor's Note: Could this be a driving factor behind low birth rates in countries with high minimum wages?] Older workers, meanwhile, pay for the increase in minimum wage by having fewer choices available to earn income in their so-called "golden" years, which may negatively affect their standard of living while also adding to the costs to society in that they would be more likely to be dependent upon public benefits to make up their income shortfall.

Of the two affected groups, the effect of excluding the youngest working age members of society from the workforce carries the greatest economic costs. The World Bank confirms that the youngest workers represent the largest number of unemployed persons in the world, a fact that exacts remarkable costs upon the societies in which the opportunities for gainful employment are tightly restricted by those in power, whether driven by corruption or by the demand for more power and control. That a standard such as the minimum wage should be abused as a tool to benefit the haves (those with jobs or the power over jobs) over the have-nots (the unemployed) is simply deplorable.

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