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Letter to the editor: Minimum wage will really cost taxpayers

Friday, August 1, 2014 - 12:01 am

President Obama and Vice President Joe Biden say raising the federal minimum wage is good for business, and they’re urging Congress to raise the minimum to $10.10 per hour.

Biden says this increase will “boost” the economy by “generating $19 billion in additional income for the neediest people.” He fails to see or mention, however, that it taxes the economy that same $19 billion. Biden apparently fails to understand that the economy might have put that $19 billion to better use, whether in hiring more people or in replacing more equipment or building more facilities.

Free is easy to sell, and that’s essentially the one and only “business” engaged in by politicians in both parties. It’s far more difficult to see and to sell the benefits of leaving the people free to invest that $19 billion wherever they chose. That $19 billion would find its way to any number of unforeseen places, where it would likely improve productivity far more than where the sovereign wants to use it to buy votes.

In his gleeful rush to sell “free” pay raises, Biden erroneously ignores the opportunity costs imposed by that $19 billion tax. He can’t see what otherwise would have been done with that same $19 billion and is thus willing to assume that there is little to no cost.

Imagine you’re an employer and that you can make perhaps 85 cents per hour on average for each employee you hire and pay $7.25. If the minimum wage is increased to $10.10 (the current proposal), you’ll not make an average of 85 cents per hour on each such employee. Instead, you’ll lose $2 per hour for each of those average employees. How many employees can you afford to keep on the payroll? None. Both you and your employees can only hope that the market will allow you to raise your prices to cover the increased costs.

Any law that bars any employment at any wage that is relevant to the market inescapably results in unemployment. The consequence of raising the minimum wage to the point at which the employer loses money on that employee results in that job being destroyed — there is no getting around it.

Brian Tracey