Friday, February 22, 2013

Raise the Minimum Wage?

How good an idea is raising the minimum wage?

It's a good question and I don't think it's a simple answer. In the final analysis it will probably help the economy but in the short term it's going to cost jobs.

It's going to be tough for small businesses to pay $9 an hour without (1) raising prices or (2) cutting payroll. If they raise prices it just puts them at an even bigger disadvantage against the large chain stores. Add this to the pending regulations coming into play with the Health Care Law and some businesses will probably give it up and simply close their doors.

So clearly, in the short term, some people are going to get screwed, but in the long term building more spending power at the lowest rungs of the economic ladder, a place with the highest propensity to spend that money, should help fuel an economy that is still sputtering on the edge.

Of course this assumes the sequestering cuts don't send it into a recession free fall. I think that's unlikely and, while I would have preferred more selective spending cuts, we have to start somewhere.

No comments: