This
week's column features an editorial from the President of AWB. Don is primarily speaking to the minimum wage
but it talks about the 'tipping point' for businesses. The incremental cost increases of licenses,
permits, fees, leases, wages, insurance, transportation, and other business
expenses, eventually forces the closure of many businesses. It would be prudent for all jurisdictions,
our local ones especially, to bring business in to the discussion early on to
help explore creative alternatives to rising license, fee, and permitting
costs. Sue VanRuff
Are We Nearing the Tipping
Point on Minimum Wage?
By Don C. Brunell, President, Association of Washington
Business
In
January, Washington's minimum wage will crack the $9 mark and we will once
again be No. 1 - the state with the nation's highest minimum wage.
Of
course, some think that's good news. Ensuring that people can support
themselves and their families is a laudable goal. But there's a problem: It's
called the law of unintended consequences.
Sometimes,
an action causes the opposite of what it was intended to do. We are perilously
close to that when it comes to the minimum wage.
Requiring
that employers pay a higher wage does not magically provide them with the money
to do so. With our state's economy faltering and unemployment above nine
percent, adding more costs to employers, especially small businesses teetering
on the brink, doesn't create more jobs.
In
fact, it may do just the opposite.
As
economics professor and author Dr. Bradley Schiller recently wrote in The Wall
Street Journal, "The overwhelming evidence is that higher minimum wages reduce
the availability of jobs at the lowest end of the job market."
We
need to have a full and open discussion of this important issue. Unfortunately,
anyone who dares challenge the notion of hiking the minimum wage is branded as
heartless and any politician who even suggests looking at the minimum wage is
attacked as anti-worker.
While
that may be effective electioneering, it doesn't help put people to work nor
does it help struggling employers.
As
our minimum wage is set to automatically increase to $9.04 for 2012 - with $10
on the horizon - we may be approaching a tipping point where employers stop
hiring. This would be particularly hard on young or unskilled workers. After
all, why pay a beginner $10 per hour when experienced workers are
unemployed?
And
the wage itself is just the beginning. After adding in the other employer costs
such as unemployment, workers' compensation taxes, social security and other
payroll costs, the out-of-pocket costs jump to over $11 an hour.
But
as economist Thomas Sowell wrote, "Unfortunately, the real minimum wage is
always zero, regardless of the laws, and that is the wage many workers
receive . . . because they lose their jobs."
Part
of the debate over the minimum wage centers on its purpose. Some argue it must
be high enough to support a family, while others point out that it's meant to
be a floor - a minimum - for unskilled people entering the job market. In his
study of minimum wage jobs over time, Dr. Schiller found that most adults work
at minimum wage jobs only a short time; that over 70 percent had moved onto
higher paying jobs within two years.
My
view of the minimum wage is shaped by my personal experience.
In
the summer of 1963, I bused tables, scrubbed pots and peeled potatoes at a
family-owned restaurant and bar in Butte for minimum wage - $1 an hour. The dad
was the greeter and bartender, the mom was the cook and bookkeeper. The oldest
son was the afternoon shift cook and a daughter worked as a waitress.
More
than once - usually around tax time - the mom told me my $20 pay would be
delayed and asked that I trust them for the money. They always made good on my
pay, but it was a struggle for them, especially when times were bad and costs
increased.
Eventually,
they hit a tipping point. When they could no longer absorb additional costs
they lost their business.
When
the restaurant shut its doors, there were no newspaper headlines, no press
conferences, no political debates. Only a simple sign on the door that said,
"Closed."
About the Author: Don Brunell is the president of the Association of
Washington Business. Formed in 1904, the Association of Washington Business is
Washington's oldest and largest statewide business association, and includes
more than 7,600 members representing 650,000 employees. AWB serves as both the
state's chamber of commerce and the manufacturing and technology association.
While its membership includes major employers like Boeing, Microsoft and
Weyerhaeuser, 90 percent of AWB members employ fewer than 100 people. More than
half of AWB's members employ fewer than 10. For more about AWB, visit www.awb.org.
Added on 11/05/2011
Filed Under
Business,
Exec's Corner by Chamber blog
