Letter to the Editor: Minimum wage increase will hurt more than help

OPINION — The federal minimum wage has been $7.25 since 2009. While it is understandable that minimum wage earners cannot exist on their income, especially since the cost of living has increased substantially since 2009, increasing the federal minimum wage will cause a domino effect of multiple economic problems. Ironically, a quick increase in the wages of low-income workers will actually increase poverty and unemployment rates.

Many businesses providing minimum wage jobs will be forced to lay off workers or reduce hiring. Some may even be forced to close. When the businesses feel the pinch of increased costs of doing business, they inevitably pass that cost onto the customers. Since many of the minimum wage jobs are in the fast- food business, how would we, the consumers, feel about paying $10.00 or more for that burger?

An increase in poverty will become noticeable when the current earner of, let us say, $15 per hour finds that his/her wages stay the same but prices have increased. To offset this, the population in this income bracket and higher will demand cost-of-living increases and those companies will feel the pinch.

Many companies have already resorted to outsourcing jobs to countries where production costs are lower.  Other companies have turned to automated systems and robots to replace employees. Consumers already pump their own gas, use self-serve checkouts and automatic teller machines, to name a few of the examples where jobs have been replaced by machines.  An increase of the minimum wage will only give more companies reason to do the same and unemployment rates will soar. This will bring about more low-skilled workers without jobs and low-income communities would be hit the hardest.

Teenagers and young adults may be shut out of the workforce if the minimum wage is increased. Statistics show that 16- to 24-year-olds make up 50.4 percent of minimum wage earners. Many young people count on the low-skilled work to help pay their expenses while going on to school to acquire the education that will enable them to be eligible for higher paying jobs. 

Increasing the federal minimum wage would harm the poorest areas the most. In areas where the cost of living and average incomes are especially low, it would cost employers more to pay their minimum wage employees and they would be unable to cover the cost by raising prices because their customers would not be able to afford their product or service.

While something needs to be done in order to keep low-skilled workers from poverty lane, an across-the-board quick raise of the minimum wage is not the answer.

The only winner in raising the federal minimum wage is the federal government. Each earner would pay a higher amount of income tax. The pockets of the working class will empty faster with higher prices while the government picks up additional revenue. Do we really want to believe that much good will be done with the increased tax revenue?

Submitted by Cherrie Cheran, Cedar City

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23 Comments

  • Don Bagley November 1, 2016 at 6:06 pm

    Why does a raise solve nothing for the poor, when increased tax cuts for the rich are considered beneficial? If a raise is no solution, then how about cutting bonuses for CEOs? If minimum wage is too low to rent a room, it has to be raised. Otherwise, what kind of third world country is this?

  • Bob November 1, 2016 at 6:06 pm

    LOL, let’s not only abolish the minimum wage completely, let’s go one further and just go ahead and bring back slavery. Why does it seem to be the same crew that wants open borders also wants no or low minimum wage, and why does every hillbilly or trailer park resident think they are an expert economist. strange times

  • BIG GUY November 1, 2016 at 7:08 pm

    We’ve run this experiment before and the author is exactly right. Past minimum wage increases have significantly raised youth unemployment, especially among the young urban poor. Yet these are the people that liberals claim they want to help. Increasing wages without commensurate productivity increases will force companies to automate workers out of jobs and/or send our jobs overseas.

    As for tax cuts, we’ve run that experiment several times too. Both Kennedy and Reagan proposed and Congress approved significant tax cuts. Since the “rich” pay by far the vast majority of income taxes, any tax cut will benefit them. But in both cases, the economy boomed following the tax cut and tax receipts by the Federal government increased substantially. Why? Because business investment and spending grew substantially, adding jobs and improving living standards for all citizens.

    We’ve also run the “tax the rich” experiment. In every case, Federal tax revenues decreased as the “rich” spent less and put their money into investments that protect their assets and reduce reported income but do not stimulate the economy. This fact is well known even to the liberal mainstream media who put Obama on the spot when he has proposed “making the rich pay their fair share.” Take note Hilary Clinton.

    I suggest those supporting a minimum wage increase spend some time reviewing real world economic experience instead of espousing Bernie Sanders’ dream world socialism.

    • Bob November 1, 2016 at 7:50 pm

      u know i’ve looked around at liberal site’s comment sections, and it’s refreshing to see that even the majority of liberals are disgusted with mass illegal immigration and labor pool oversaturation. none of us want the 3rd world right at our doorstep. the globalists (both R and D) have other ideas. I hope i’m right about liberals in this case, maybe not tho, bc college aged kids are extremely brainwashed–taught to love muslim terrorists and 3rd world “diversity”

    • RealMcCoy November 2, 2016 at 10:34 am

      Big Guy nailed it.
      As for Seattle’s minimum wage boost- look up the subsequent increases in mean rent, and look up how many businesses are going to automated kiosks.
      A business is not in business to lose money- they will find ways to compensate for the forced increases.

  • chilered November 1, 2016 at 8:45 pm

    Spoken by someone who no doubt is well heeled. Try explaining that first paragraph to someone is below the poverty line. Sheesh.

  • godisdead November 1, 2016 at 9:52 pm

    Granted, the letter to the editor is only an opinion, but that opinion might be more believable if she had some facts that were documented,and reliable sources.
    This is a fact – Seattle raised their minimum wage. Even with the opposition claiming economic destruction, it’s been a success.

    • BIG GUY November 2, 2016 at 5:30 am

      Everything I found on Seattle’s minimum wage increase is mixed: some reporting no impact, others reporting job losses. Interviews with individual small restaurant workers and owners tend to show negative effects (fewer employees at smaller restaurants, loss of benefits), while those supporting the higher minimum wage tout little change in overall employment (which all agree is driven by much larger economic trends). Looks like Seattle’s big restaurant chains and high end places can absorb the increase while the smaller, independent ones are struggling.

      Ironic that yet another liberal dream has the effect of rewarding big business and punishing smaller ones, limiting competition. Same thing is happening with over-regulated banks (Dodd-Frank) and health insurance companies (Obamacare). An over-regulated economy results in large businesses that in effect become tools of big government. These oligopolies lobby extensively to influence regulations and then learn to live with the results while small business is overwhelmed by regulatory red tape.

      Since you are calling Seattle a success, please provide specific examples. As you look for examples at individual Seattle restaurants, order your Big Mac on the automated kiosk at a local McDonalds. You might ask the owner how he/she could justify putting an expensive device like that in a low-price restaurant that pays such low wages.

    • RealMcCoy November 2, 2016 at 10:50 am

      ‘Success’ stories of the aftermath of $15/hr minimum wage increases

      http://abc13.com/business/wendys-to-replace-workers-with-machines/1341408/

      http://www.businessinsider.com/self-service-kiosks-are-replacing-workers-2016-5

      http://ijr.com/2015/05/330129-guy-wont-taking-mickey-ds-order-much-longer-might-surprised-reasons/

      By the way, google has hundreds of other pages talking about it.

  • Rainbow Dash November 2, 2016 at 12:51 am

    Cherrie,
    I want to say that I enjoyed reading your opinion. I can tell you put a lot of thought into it and I appreciate that. I do have one question for you though:

    You say that at the end of your letter; “While something needs to be done in order to keep low-skilled workers from poverty lane, an across-the-board quick raise of the minimum wage is not the answer.”

    I agree.

    My question is simple: What is the answer?

    Here’s my opinion:

    I used to work at at a clothing retailer in town. That store purchased Chanel #5 in packs of 6 for $5 a bottle. The store would then turn around and sell one ONE! of those bottles for $75. It was the same for clothes., They bought most items for ~$10-$15 an item and sold it for $75+. The small store I worked at made over a million dollars per year. I know because every year after the store was closed, they would announce it. I say that because I hear arguments that businesses simply cannot afford to pay their employees a decent, livable wage. In my experience, that is simply not true.

    My thought is this: If you cannot afford to pay your employees a livable wage, then you shouldn’t have employees. Period.

    I think the idea of a “liveable wage” is a good dream to have but not realistic in our current society, thanks at least in part to CONSUMERS who care more about themselves than they do others.

    I think we need to build a society of of consumers that hold employers accountable by taking their money elsewhere if and when the employer doesn’t pay their employees a livable wage.

    ….Of course, we’d have to build a society that says it’s unacceptable for consumers to treat employees in retail and service industries as anything less than human first.

    Just my opinion though.

    Hope your Halloween was AWESOME! ♥

    • BIG GUY November 2, 2016 at 7:01 am

      Hard to believe Chanel would sell its premier brand at $5 per bottle. If true, Chanel is leaving a lot on the table for retailers who sell it $75 per bottle. A low volume product like perfume does require a big mark up to compensate for a retailer’s overhead so I wouldn’t be surprised at $25 per bottle wholesale but $5 doesn’t make any sense. Every street vendor in town would buy it wholesale and offer it for $30 per bottle retail and make a killing.

      You propose that “we need to build a society of of consumers that hold employers accountable by…” paying higher prices for everything they buy. Good luck with finding these consumers: most of us look for the lowest price for the things we want.

      St. George’s tourist-oriented economy is heavily weighted toward low-paying service jobs: retail and hospitality (hotels, restaurants, etc). Employees in these businesses who value living here–and many do–must be willing to accept lower wages. Their alternative is to move elsewhere and look for employment in higher wage industries.

      • Rainbow Dash November 2, 2016 at 2:37 pm

        It might be hard to believe BIG GUY but it’s true. I don’t know if that is common but that is what that particular store paid at the time I saw the invoice in person.

        I don’t have much time so i will respond with more later.

      • Rainbow Dash November 3, 2016 at 1:20 am

        BIG GUY,

        St. George’s tourist-oriented economy is heavily weighted toward low-paying service jobs: retail and hospitality (hotels, restaurants, etc). Employees in these businesses who value living here–and many do–must be willing to accept lower wages. Their alternative is to move elsewhere and look for employment in higher wage industries”.

        Please correct me if Im wrong but it sounds like what you’re saying is: The service industry jobs in St George are the way they are and if service industry employees don’t like it, they can move somewhere else.Frankly, I’m surprised that you would say something like that BIG GUY. I will stipulate that in theory you are correct. In theory anyone can move anywhere in this country at any time and do anything they want. Unfortunately that’s just not realistic for many employees in the service industry. Let me share a few facts:

        1.) The minimum wage in Utah for waitor/waitresses “Tipped Employees” is $2.13/hour. My brother worked at one of the more upscale restaurants in town for a couple of years. More often then not, he came home with a zero dollar paycheck thanks to taxes and other things. That means that more often then not, if people didn’t tip him, he didn’t make any money. On top of that, at the end of the year, the government taxed his tips.
        Ive never been a waitress but I have been out with more than my fair share of people who pick apart the waitor/ess level of service so they can justify leaving the bare minimum for a tip (If they tip at all). Remember the diner scene from Resevoir Dogs? If not here it is. Listen to what Steve Buscemi’s character (Mr. Pink) says because there are a lot of people like him. A lot more than you might believe, unfortunately.

        2.) The Minimum Wage in Utah is $7.25/hour. I also believe that most of these employees are part time and work from 20-30 hours/week. In my experience most retail employers pay anywhere from $9-11/hour. For the sake of argument I’ll say the average is 25 hours/week @ $10/hour. That’s $1,000/month gross and maybe $850 after taxes. Also for the sake of this lets say the employee is single and childless. Here goes:
        A) Last I checked Rent was around $450 for a one bedroom or studio apartment in St. George. renting a room in someone’s house was a similar cost. Utilities were $50 and Food is maybe 200/month. Also Depending on the type of car you drive gas can be anywhere from $30 on up ( I’m lucky enough to drive a fuel efficient car and Gas costs me $20 every 2-3 weeks). I think Sun Tran charges about $30 for a month pass. That’s $730/month out of $850 and does not include any other expenses.

        Now you’ll probably say that $120 is a lot if you know how to stretch it and you’re right but you can’t stretch car insurance payments, or registration for your car, or health insurance payments. What happens if you get in an accident? In fact..lets ditch the car… saves you money right? Here’s the thing though… Sun Tran is a small transit service and while it has a lot of potential it still leaves A LOT to be desired. Sun Tran runs on 40 minute intervals so If you miss a bus or it’s late, you risk being at least a few minutes late to work and…well…lets just say employers aren’t exactly short on applicants right now.

        My point is two fold:
        1.) No one should have to depend on the generosity of random strangers so they can eat like Waitor/resses do in Utah. I think the fact that many do is disgraceful. Especially considering that the majority of people in this state call themselves Christian.
        2.) As I hope I’ve made clear, the wages paid by most retail employers here, while better than nothing and higher than the law requires, is barely enough when you factor in the cost of things people need to survive. Things like a roof….and food.

        Have a nice day ♥

        • Rainbow Dash November 3, 2016 at 1:26 am

          Please insert an tag at the end of this sentence in my reply above: The service industry jobs in St George are the way they are and if service industry employees don’t like it, they can move somewhere else.

          For clarity it is this: The service industry jobs in St George are the way they are and if service industry employees don’t like it, they can move somewhere else.

    • RealMcCoy November 2, 2016 at 10:32 am

      Welcome back!

    • mrsmith November 2, 2016 at 12:49 pm

      The simple answer to the question posed has nothing to do with workers or businesses. In fact you can’t really define the answer using money as a solution. It has nothing to do with minimum wage or livable wages or any kind of wage. The problem is there is no standard. You might work a job that pays you more but to the previous person it is less than they are willing work for. It’s the same job but now someone is willing to do it for less. And vice versa, someone would be happy to do your job for less than what you are willing to do it. With migrant work and low education compromises, the bottom of the barrel is very low. The government will step in and suggest a minimum, but this is far from a standard. The government is willing to do this because like the author states, it’s a win/win for them. In 1976, the US officially abandoned the idea of a gold standard. This ultimately started the steady inflation of our monetary system. There is no way to tie the price of bread to a standard of pay. This allows the money to fluctuate and also allows the price of goods to be determined by supply and demand. At this point the government can’t stop inflation unless they standardize the scale of goods. Any increase in wage will only cause more fluctuation in the price of goods and services. The answer is simple but the government will never be onboard because they will lose control of interest rates and taxes. The answer is a standard.

  • ladybugavenger November 2, 2016 at 12:28 pm

    If the minimum wage is raised and recreational marijuana is legalized then their will be success….like Washington and Colorado.

    • .... November 2, 2016 at 11:19 pm

      Yeah and that will increase the sales of Cheetos and Coke

      • ladybugavenger November 3, 2016 at 10:13 am

        And then there will be an increase of 24 hour donut shops everywhere!

  • dhamilton2002 November 2, 2016 at 3:23 pm

    Raising the minimum wage has proven to be success in many cities across the country and has only helped small businesses not hurt them. Those opposed are simply uninformed.

    • RealMcCoy November 3, 2016 at 11:09 am

      BWAHAHAHAHAHAHA…

      OMG you are so funny!

      Tell us, Mr. Economist- how does increasing costs help small businesses?
      Please explain with real math, not the liberal logic of ‘but it makes everyone feel warm and fuzzy!”.

      • Rainbow Dash November 3, 2016 at 3:34 pm

        Thanks for the ‘Welcome back’.
        Im not ‘back’ per say but I did feel the need to lend my opinion on this article.

        I don’t know what your experience is RealMcCoy but mine has been that the more money people have, the more they seem to spend and the more money people spend, the better businesses of every size do. In the short term, you’re right, it is an increased cost. On the other hand, in the long term, it means that person has more money to spend and the more money they have, the more secure they might feel in purchasing more from that small business.

        I will stipulate that there is a balance. You cannot have to much money in the economy but too little is bad too.

        You can disagree with me if you want but it is my humble opinion that the economy is best when people make enough money to be able to afford to buy the things they need and a little of what they want. I’m not saying that we should pay the dude flippin’ burgers at McDonalds on Sunset $15/hour but I do think s/he should make enough to accomplish my above statement.

        I think the economy would benefit ENORMOUSLY if people took financial planning a bit more seriously though.

        • RealMcCoy November 4, 2016 at 12:33 pm

          Experience is 2 successful businesses and 12 employees. For the record, I do not get the ‘bonuses’ of a CEO, I do not have ‘multiple homes and a yacht’, and I DO work at both of my businesses. I make a little more than the others because I put in the work to start the places up, and I work harder than my employees.

          In response to your statement “the more money people have, the more they seem to spend and the more money people spend, the better businesses of every size do”, yes, in a perfect world, this would work; however this world is not perfect.
          The increased income is quickly dissolved with the subsequent increases in rents and prices at the businesses that are now paying for the increased wages. The real winners are the landlords and owners of apartments/condos/townhomes. They KNOW their renters are making more money, and rent will increase because they KNOW their renters can ‘afford’ it. The end result is the same predicament- people are making more but still cannot afford the rent. Those that want to mention the Seattle ‘success story’ need to look at how much rent in Seattle has increased. It could be considered criminal (definitely predatory).

          I would also say that the other beneficiaries of increased minimum wage is that government gets to collect more taxes on the extra income and spending.

          Another point asked by Don Bagley was “Why does a raise solve nothing for the poor, when increased tax cuts for the rich are considered beneficial?”
          It’s simple- given a raise, a ‘poor’ person will go out and buy a big screen tv, or a new 4 wheeler (on payments, of course); a tax cut for ‘the rich’ (and I am by no means rich) allows me to REINVEST the savings into more employees, other business ventures, or an improved business model where everyone benefits.

          This difference is usually lost on people like dhamilton and godisdead- people that are not business owners and have spent their working lives as employees, not EMPLOYERS. If they had actually been business owners, they would already understand the basics of economics.

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