Can You Afford a Minimum Wage Increase?

In his State of the Union address last week, President Obama unveiled his latest proposal to influence free market outcomes: raising the minimum wage to $9 an hour.

For businesses across the country, he said, it would mean customers with more money in their pockets. People currently on government assistance, he said, would probably need less help from government.

Sounds good, right? But here’s what the president left out – some economic facts that you know well:

• Employment opportunities for minimum wage workers actually shrink when the base wage is increased.
• Fewer minimum wage job opportunities create a barrier to entry into the workforce for many teenagers and those currently unemployed.
• The prices of goods and services will rise to cover the increased labor costs.

The president also called for indexing the minimum wage to the cost of living, but didn’t tell the rest of the story on that, either, including:

•    This type of mandate adds burdens to you as employers, putting you at a competitive disadvantage.
•    The expense of an indexed wage increase would come on the heels of costs that are already increasing, like the dramatic cost of employee benefits…especially due to the mandates of his new healthcare law.

Never missing an opportunity to portray business owners as “rich”, the president said working people shouldn’t have to wait for wage increases “while CEO pay has never been higher.”

I don’t know about you, but I’m still trying to figure out why the president thought that was relevant. After all, small businesses, not big corporations, are where many minimum wage job opportunities exist. And you are not “rich CEOs” by any stretch of the imagination.

The economic facts certainly seem to be on the other side of the president’s proposal. And yet, President Obama is not alone in this push to hike wages. Many states are also seeking to mandate an increase for the minimum wage. If your state is one of them, make sure to contact your NFIB state director to see you how can fight back and explain to elected officials the damage this well-intentioned idea can inflict.

I know that you agree with the president that no one who works full-time should have to live in poverty. But we must make sure he and all policymakers understand that the best way to prevent poverty is to strengthen and support American small business survival and growth. To increase the minimum wage while most small firms are struggling will sharply increase the odds of poverty for many who depend on Main Street businesses to support themselves and their families.

Like the gravity that pulled the meteor down to Russia, the laws of economics cannot be ignored. When wages that cannot be sustained are forced up, job opportunities and the small businesses that provide them will have nowhere to go but down.

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About Dan Danner

Donald A. "Dan" Danner was named president and CEO of the National Federation of Independent Business, the nation's leading small business association, in February, 2009. Danner is only the sixth president in the history of the organization. Before rising to the top spot, Danner was executive vice president, overseeing NFIB's federal and state public policy and political activities as well as the organization's three 501 (c) 3 operations: the Research Foundation, Small Business Legal Center and the Young Entrepreneur Foundation. He came to NFIB in 1993 as vice president of the NFIB Education Foundation (now known as the Young Entrepreneur Foundation) and was named vice president of federal public policy in 1995. Previously, he was chief of staff to the U.S. Secretary of Commerce. Danner also worked in the White House Office of Public Liaison, where he was special assistant to the president and deputy director of the department. Before joining the White House staff, Danner was an executive with Armco Inc., a steel manufacturing company. He held leadership positions in sales and marketing, as well as state and federal lobbying on issues such as energy, environment, taxes and trade. He also served four years as vice president of federal relations at George Mason University. A native of Middletown, Ohio, Danner holds an MBA degree from Xavier University and an electrical engineering degree from Purdue University.
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