Minimum Wage Chicken Little?

16 07 2008

I don’t think so…

I’ve been writing, for the last several years at least, warning of a coming problem that started to finally manifest itself a few months ago. Yet, the root of the problem is STILL being ignored. And what makes this even more scary is that round number two is right around the corner. What I’m talking about is the minimum wage increase.

Increases in wages can and should be a good thing… when they naturally occur. The main problem is that some employers kind of ride the wage far too long for many employees. The Feds increases the minimum wage to correct that situation. BUT, the forced rise comes with some negative consequences. It slows (or stops) job growth and creates inflationary pressure on the economy. THAT is the reason that the economy has slowed …, at least that is the starting point of the current situation.

Now we find that the economy is being hit from multiple directions, mainly because of the energy issue (which itself was kicked off by a federal mandate to use ethanol to conserve petroleum, which in turn set off a rise in feed and food prices with resulting shortages).

Like I said, round two is right around the corner, but nobody is talking. We’ve not heard a word about the coming raise in the minimum wage. A raise of 70 cents per hour coming next week. As it historically does, a wage increase negatively effects the economy, so look out for this one. We are already in a precarious economic situation due to energy and food costs, which themselves are starting to cause real weakness in the job market (Note some of the large layoffs occurring right now). Look for this rise in wages to virtual stop any economic growth that is occurring and kill an especially week entry level job market.

 Yet, as large a problem as this is, NOBODY IS TALKING. And it appears that nobody is doing anything about it. Everybody seems more concerned with other issues, issues that pale in comparison to the nightmare on our doorstep. Not to mention the nightmare our elderly and those on pensions already face… as they don’t (and won’t) get any increase. Raises in the minimum wages equal cuts in income to them.

The total amount of the three step increase in the minimum wage – about 40%. The result – cost of living increase of about 40%. Do the math. The increase has to be paid for somehow… Guess how.

-Al

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One response

18 07 2008
AB5SY

You hit it square on the head. Good to see I’m not the only one thinking along these lines.

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