By Fred Wszolek
Tuesday, May 06, 2014
President Obama used a recent weekly address to once
again call for an increase in the minimum wage up to $10.10 per hour. The
President urged Congress to pass legislation making this change, and praised
similar minimum wage hike efforts underway in states and localities. He
criticized some in Congress for standing in the way and promised to “keep up
this fight” because “our economy works best when it works for all of us – not
just a fortunate few.”
Perhaps, before he again employs his lofty rhetoric in
defense of this perennial liberal cause, the President should consider the
evidence which suggests that such a dramatic minimum wage increase would
actually damage our economy and kill American jobs. Also, he may want to think
about just who stands to benefit most from a minimum wage hike – is it really
“all of us”?
The Lucas Group, an executive search firm, recently
released a study which found that the proposed 40 percent increase in the
minimum wage would force many businesses to slow down expansion or even freeze
hiring entirely. Nearly one third would have their hiring plans negatively
affected in some way. Consumers would see a rise in prices as well and some
businesses would even be forced to close. The service industry would be
especially hard hit.
And it’s not just the Lucas Group warning of these
dangers – there’s plenty more research where that came from. The Wall Street
Journal reported that nearly 40 percent of businesses polled in another survey
would be forced to fire employees under President Obama’s proposed minimum wage
law. The Congressional Budget Office (CBO) issued a report earlier this year
which noted that raising the minimum wage to $10.10 could kill up to one
million jobs.
The Lucas study was focused on small- and medium-sized
businesses, the engines of the American economy. It’s Main Street that’s been
hurt the worst so far by the Obama Administration’s economic policies – to say
nothing of the crippling effects of ObamaCare – and it’s Main Street jobs we
stand to lose if the minimum wage hike goes through.
If workers and small businesses have the most to lose,
who has the most to gain from a minimum wage hike? One group that’s pushing
actively for the increase is a trusted ally of the President – organized labor.
The American Federation of Labor and Congress of Industrial Organizations
(AFL-CIO) President Richard Trumka has breathlessly praised the “sheer breadth”
of wage hike efforts around the country as “breaking new ground in dynamic
ways.” And no wonder he’s pleased. If minimum wages increase, Big Labor is in
for a windfall.
Union workers already make considerably more than the
current minimum wage. However, many union bosses set up their contracts so that
an increase in the minimum wage leads to an increase in the union wage as well.
Baseline union wages are often set at a certain percentage above the minimum
wage, so the former would be set to increase.
Higher union wages mean higher union dues. And labor
bosses like Trumka know how important these dues are. As union membership
declines across the country, they’re grasping for every cent they can get their
hands on. Of course, whenever union coffers fill, that’s good news for the
sympathetic politicians they tend to support during election years – like
President and certain Members of Congress pushing for the minimum wage hike.
That’s the real cycle of minimum wage economics. A higher
minimum wage means a higher union wage, which means higher union dues.
Businesses have to slow down hiring or lay off workers, jobs disappear, but
more money pours into the pockets of Big Labor bosses. So much for the
President’s desire that the economy work for “all of us.” It seems like his
minimum wage increase will end up benefitting a “fortunate few” after all –
politicians in Washington and their Big Labor allies.
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