Raising the Minimum Wage: Why it Does More Harm than Good

In the State of the Union Address President Obama’s proposal to increase the minimum wage attracted a great deal of attention. At the time, the assembled audience greeted his statement with a standing applause. A few days post-speech is the nation finally ready to forget the rhetoric and focus on the consequences raising the minimum wage imposes on the middle class?

Let’s take a look at a local example. A smoothie business owner works every day to maintain a profitable store, support his growing family, and keep on three hard working employees at minimum wage. If the government mandate to increase the minimum wage he could be looking at $11,000 in additional annual expenses. Since businesses survive on profit, the owner may be forced to lay off a worker and pick up the extra hours himself. What happens to this former employee? All odds point to another person added to the unemployment payroll.

Additional government mandates on businesses places a strain on the middle class. Companies’ inability to retain employees send these individuals back onto the government’s payroll and forces the burden onto the hard working middle class.

What happens when the government finds itself faced with increased unemployment benefits to cover? Washington needs to instantly gain the funds while keeping the source practically invisible to the untrained eye. Enter a “stealth tax” coded as inflation.  When the government presses the magic button to print more currency the dollar loses its purchasing power. Suddenly, the middle class’s money earning 1% in the bank can no longer keep up with the 10% price increase that we are seeing in the vital staples of life; i.e. food and energy.. These consequences trickle back down to the smoothie store owner who is now forced to provide more free labor himself while paying more money as prices for ingredients and shipping costs continue to rise. The $1.75 appears to be a much bigger deal than the number lets on. Pretty soon the local businesses are going to run much like the government: on a deficit. The only difference is, the local smoothie store will not survive.