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Throw ‘em a bone, Arnie

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Reach back to your high school English days and you may recall a chapter in Mark Twain’s delightful “A Connecticut Yankee in King Arthur’s Court,� where our hero attempts to explain to the country folk in a “little tributary kingdom� that having their tradesmen’s wages twice that of the adjoining realm, but having their costs more than double, was not a thing to be admired. 
     As Twain struggles through the math and the consequences, he’s unable to bring understanding to the serfs at the inn. They know their magistrate has fixed their wages at twice the neighboring territories and it matters not that they pay more than twice for their staples as a result.
     They’re happy. They get paid more. That’s all they can see and indeed they’re proud of the fact. They could be Californians.
     Please Arnie, read the story to your kids. There’s a lesson here for both them and you.
     After listening to Governor Schwarzenegger’s recent State of the State message, it appears that his initiative losses have so disheartened him that he’s now intent on winning over the masses by throwing them the bone of a dollar increase in the minimum wage. 
     Don’t do it, Arnie. You will no doubt win kudos from those who believe that the state should raise people’s wages via diktat but the costs will be there, yet hidden, in the loss of jobs for the very folk you are attempting to help: the poor, those with few salable skills, and those just starting to work. 
     When considering those at the bottom of the wage scale, it is an understandable impulse to wish to see them paid more. Many of us are blithely generous with other people’s money, and it is an easy indulgence for us to point to small business owners and demand that they should raise the wages of their bottom-rung employees. 
     Note that this mandate will fall only on small businesses, the component of our economy that produces the bulk of new jobs. Mid-size and large companies seldom pay minimum wages. They’re already established and the productivity of these firms easily allows their employees to be paid above the minimum rate. 
     You may recall Wal-Mart recently announced its support for a raise in the national minimum wage and clever folks they are. This giant of the retail trade got two benefits from this unusual position. The first was a PR coup—they get to burnish their image as a caring employer. The second, and more important, is based on the fact that Wal-Mart pays their employees (excuse me — Associates) more than the minimum wage but, wait for it, their competition, those mom-and-pop stores we all worry about, are more likely to be a business that pays employees at base rate. Too bad if they get priced out of the market by government fiat; we’ll just blame their demise on some wicked, uncaring multinational corporation and few will point to the state’s social tinkering as cause.
     For the press, it will be easy to find an employee to interview who got a raise from the state’s edict, didn’t lose their job and is glad for the extra buck. They, like the rest of us, will feel they should be paid more and indeed will claim to deserve it. (Here’s a fun exercise: try to find someone who will declare, with a straight face, that they get paid too much.)
     However, we seldom hear of the jobs that weren’t created because of this misguided policy. Few employers will be interviewed for us to learn of their decision not to hire an additional employee. We seldom read of the uncreated job.
     In economics-speak, the decision to hire is made at the margin.  Employers are always seeking to expand and will hire one more employee if they feel the return is worth the cost. If not, that job goes uncreated and only an employer is in a position to make that determination, not the state legislature. 
     Pay no attention to those who claim that arbitrarily-increased wages are innocuous to business. This comes from folk who never had to sign a paycheck. A mandatory dollar raise for an employee will translate into something greater than a dollar for the employer, who has to add on FICA, workers comp and other costs tied to wages. An increase of 20 to 40 percent above the wage increase would not be unusual and will be an added burden for small business and, yes, will kill jobs.
   For those who support such social engineering, if you think raising the minimum wage by one dollar is a good thing, why not double the rate? Heck, why not triple everyone’s wage? Why not multiply everyone’s income by fifty and we’ll all live like kings? Sounds silly, doesn’t it? If so, ask yourself: if that scenario sounds insane, why is a little insanity a good thing?
     We live in a free enterprise system, and employers and employees should be treated like adults. We should allow them to make their own decisions. No one has to take a job at minimum wage. It’s voluntary. I started there and you may have too. But we moved on, yet were grateful for having the opportunity to get that job, even if it was at minimum wage.
     It is easy to be blinded by our good nature. We want to help those at the bottom of the pile and it seems like such a simple and good thing—raise the wages of the poor. But the costs of this policy will in truth mean fewer jobs than otherwise, and it is precisely those at the bottom who most need those jobs. These are the people who will pay the costs. The losers will be the poorest of the workers and the small businesses of our state. 
   Arnie, you done us wrong. ∆
    
Gordon Mullin can be reached at dgmullin@charter.net

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