Minimum Wage Hike Could Lead to Mass Layoffs

minimum wageNewly conducted studies from the Express Employment Professionals, a private staffing firm, found that if there is a hike in the minimum wage law, it could lead to mass layoffs. An estimated 38 percent of business owners who were surveyed said that if the minimum wage was increased from the current $7.25 an hour to the proposed $10.10 an hour, they would be forced to reduce their staff. This is extremely bad news for an already weak-in-the-knees economy.

As if that was not horrible enough, 54 percent of the participants in the study stated they would reduce hiring, meaning less job growth or creation, while another 65 percent said they would charge more for their products and services. It seems that a minimum wage hike will send our “economic recovery” spiraling back down into the toilet. If this the kind of outcome to be expected from a raise in the wage, why is Congress so determined to pass it? That would be the question of the day.

A minimum wage law has never been the great economic equalizer that so many Progressives claim it to be. This is because government interference into the marketplace is actually the cause of much of the imbalance it tries to repair. The reason so many people claim there is a need for a hike in the minimum wage is because the cost of living continues to sky-rocket, which means individuals who are making $7.25 an hour are having a hard time making ends meet. The problem is that, like the study stated above, if the wage goes up to $10.10 an hour, businesses stop hiring and raise prices, which causes an increase in the cost of living and everything ends up back where it started.

The problem with a minimum wage hike, besides the fact it could lead to mass layoffs, is that it keeps poor people in poverty. When a company is forced to pay a minimum wage, the owner will be much more selective in the hiring process. More than likely, a business owner will look for someone who is skilled and will provide them with the greatest return on their investment, since they have to pour a substantial amount of money into this worker for a job that might be overpaid. Since most minimum wage workers are unskilled, the people who need work the most, the individuals that the minimum wage law was supposed to help, just got stuck in a catch-22. They need a job to get skills, so that they can move up the economic ladder, but they need to have skills before they will be considered for the job. If the person in need of a job had direct access to the business owner and could openly negotiate a wage, with no law enforced minimum, the individual could then get the job, develop the skills, and eventually move on to a higher paid position elsewhere.

The other problem with a minimum wage law is that it is a band-aid for a wound that keeps getting bigger and continues to bleed, requiring a larger and larger bandage. The wound needs to be stitched up in order to stop the bleeding. The issue is the high cost of living. There are several ways that the cost of living can be lowered, making the need for a minimum wage obsolete.

A high cost of living primarily stems from inflation. Contrary to popular belief, inflation is not when prices go up, although that is a side effect. Inflation is the devaluation of the currency through an increase in supply. It is a lot like baseball cards. If a friend has a Mickey Mantle rookie card, and it is one of only three in the world, it will likely have a high value. If there are millions of these rookie cards, the friend in question will have a card worth next to nothing. This is what is happening to the U.S. dollar on a daily basis, thanks largely to the Federal Reserve having the ability to print money for whatever reason it chooses.  As the purchasing power, or value, of the dollar decreases with the injection of newly printed money into the economy, it causes the prices of goods and services to go up, making things more expensive for the average consumer.

If economic equality is the goal, then the Federal Reserve needs to be audited, and ultimately abolished, stripping it of its power to freely print money and devalue the dollar. The value of American currency will rise, and prices will lower, making goods more affordable for everyone. This means that Congress will necessarily have to cut frivolous spending, since it will no longer be able to print money out of thin air to pay the bills. Paying off some of the national debt will also increase the purchasing power of the dollar, once again lowering prices as a result. The more affordable things become, the easier it is for low-income earners to make a living, and the easier it will be for them to get jobs, skills, and move up the ladder out of poverty. This seems to be a much better alternative to the minimum wage hike, which will lead to mass layoffs, and end up exacerbating the real issue even further.

Opinion by Michael Cantrell

Fox News
Atlanta Journal-Constitution
Staffing Industry Analysts

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