Local Radar

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A column by the Editor

Minimum wage increase will not raise wages, but will devalue the dollar

web posted January 5, 2007

COLUMN – Now that the Democrats have taken control of Congress there is no question they are going to raise the minimum wage to $7.25. Now, that might sound like a great thing, but it isn’t. There are only three winners with a raise in minimum wage increases, the Democrats, unions, and the government, everybody else pays.

The first thing to take into consideration is that the Federal Government has no business messing with the wages paid by private companies to workers. If you believe government has a right to set the minimum wage you have to accept that the government then has a right to set maximum wages as well. Wouldn’t that be great, the government telling you how much money you can make.

That point aside, the fact is that only 0.6% of all workers make minimum wage and only 1 in 5 live in households with a net income below the poverty level. A vast majority of those earning minimum wage either are supplementing their retirement income or work in service industries where they earn cash tips, which goes largely unreported as income.

What the Democrats plan to do is place a huge burden upon the other 99.4% of Americans.

Very few people who take positions that start at minimum wage stay at minimum wage. As their skills increase with their training they get raises based on their performance. So why tinker with the increase?

Because all union contracts are based on minimum wage and unions are huge backers and a source of funding for the Democratic Party. Once the wages increase all union contracts will have to be renegotiated to reflect the same 40% increase in base pay ($5.15 and hour to $7.25). Higher wages for union workers also will mean an increase of union dues, which will in turn end up benefiting the Democratic Party.

The government is also a winner as all wages of all working Americans will increase and in turn result in more taxes being collected.

What most people do not realize is that there will be no more money in your pocket due to the raise in minimum wage. In order to offset being forced to pay higher wages companies and industries will just raise their prices exponentially resulting in a zero increase in spendable cash for workers.

When minimum wage is increased a domino effect begins. Those who are working at minimum wage will now be making $7.25 an hour, a wage that those who started in an entry position are making after being productive employees. Of course, they will now be back at minimum wage so they will demand an increase in pay. When they receive their increase, taking them to a level of pay that someone who has been with the company longer or has been more productive, that employee will be demanding a raise and so on down the line.

So, people are earning more, prices will rise to offset the increase in pay, and the net result is zero for the worker. You have more money, it is worth less, but unions, Democrats, and the government are fat and happy.

Think of it as a Monopoly game. In the beginning all things are equal with a fixed number of dollars and players have to work to make wise choices and financial bargaining in the game to accumulate wealth. Now, take the money from a second game and insert it into the game being played. Everyone now has more money, double in fact. So, prices rise in order to accumulate more of the newfound wealth of the players. Before long the natural order of a free market will set the pricing at double since the amount of money has doubled. The fact is that the properties did not increase in value, the value of the money decreased by half.

However, the Democrats won control of Congress and they will get their way, pass the bill, and President Bush will sign it, and working Americans will see the value of their savings decreased with the devaluing of the dollar.
 


 

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