Creating Jobs By Eliminating the Minimum Wage

I mentioned earlier in the week that the September 13th issue of Forbes had several articles that I wanted to post about. The second of these is an article entitled Scrap The Minimum Wage written by Art Carden, and assistant professor of economics and business at Rhodes College in Memphis, Tenn. Dr. Carden talks about his research that shows that "The effect of a minimum wage is a classic example of the law of unintended consequences. Minimum wages create unemployment: At above-market prices people want to supply more labor than employers wish to hire." He goes on to suggest "Repealing the minimum wage would have two effects. First, it would create job opportunities, particularly for teenagers, and the chance to acquire experience today that can translate into higher future earnings. Second, it would send a powerful message to employer, employees and investors that they can hire and invest without fear of punishment."

Carden makes the observation that the increase in the minimum wage from $5.15 per hour to $7.25 per had the effect of reducing employment 6.9% among teens, even more so for minority teens. Carden writes that repealing the minimum wage would create work and says "even a low-wage job in most cases beats no job and no wages." He points out that "supporters of the minimum wage argue that earning $7.25 an hour makes a statement about the kind of society we live in." But as he further states "Unfortunately, that statement amounts to: "We don't understand how competitive markets work." He concludes with "Minimum wage advocates might mean well, but other people without jobs can't buy food, clothing and shelter with others' good intentions."

I like Carden's idea. I have seen companies that cut down on staffing because of the increase in the mimimum wage. Just like overtime, minimum wage was put in place during a time of economic depression and recovery in order to "provide" for the welfare. I have also seen the marketplace work where companies did not pay minimum wage, even fast food companies, because the labor pool was too small and they were competing for workers.

However, I have a very hard time seeing this coming about. Just like anything else, especially govenment programs and mandates, if you provide it too long it becomes an entitlement. I don't see any politician supporting getting rid of the minimum wage. I see the reverse. In today's environment I actually see another minimum wage increase coming. Another 3 step process to get it to $10  per hour. It will most likely be called the Ted Kennedy Memorial Wage Increase or Wage Increase for Equity (WIFE). Let's see how good of a futurist I may be...

Catch Up Time

Ok, I have not blogged in a month and a half. Vacation is part of the reason. Overcoming the intertia of not blogging is tough. Restarting something, anything, after a layoff is tough. I am going through that right now with exercise and dieting too... Oh well here are some catch up thoughts.

1. Vacation- We don't take enough of it in this country! We are behind the rest of the world in how much we take. I have come to the conclusion that vacation needs to be taken in a minimum of two weeks, especially if you are going out of the country. We Americans overwork ourselves and it is to our detriment. While on vacation in the Dominican Republic I met a young woman who had to go and check her work email twice a day. I don't think she ever relaxed.
2. Immigration- Whether or not you think the immigration plan the President and Congress is working on is right or not it is going to be a nightmare for Human Resources departments. It will require the following: Use of electronic verification that is currently not designed to handle the 7 million employers that will have to sign up; REVERIFICATION of ALL your current employees, regardless of how long they have worked for you; a follow up system on everyone that gets kicked out of the system (currently about 15% of the verifications that get sent in electronically.) In addition, the fines go up exponentially. YOU HAD BETTER PAY ATTENTION TO THIS ONE. SHRM feels this will have the impact of FMLA. (Oh great!)
3. Minimum Wage- How many of you noticed that the increase in the minimum wage that got snuck into the Iraq War funding bill? It will go into effect 60 days after the President signs the bill. So far I have seen no details, but I am sure they are forthcoming.

Well, that will do for now. I will keep it going now... at least until I go on vacation again and inertia takes over once more.. LOL.

Minimum Wage Increase

I heard a discussion on NPR about the effect of the increase in the minimum wage that will occur in January with the new Democratically controlled Congress. It will increase over a three year period ending at $7.25 per hour. Obviously, being presented on NPR the discussion had both pros and cons.

My question for you is: How do you feel about? Will it effect your business? Do you think it will affect the economy? Will people gain from it? Will people lose as a result of it? Will we, the consumer, ultimately pay for it? Weigh-in on this discussion and lets hear what you have to say.

However, regardless of what you think about it, it is coming, so you had better be thinking of the issues and how it will effect your company.