There are two very serious problems facing the American economy. One is the high level of unemployment. The other is the fact that too many of the new jobs in the marketplace pay very low wages.
It does not seem fair or right to have people work a full-time job, but earn too little to be able to afford to have a decent place to live or enough to feed their family. Raising the minimum wage would help those workers who barely earn enough to take care of themselves.
If the current minimum wage levels were increased, poor and lower middle class working families will not only be able to live better, they will also have more money to spend on merchandise bought in the marketplace and on services. This would stimulate the entire economy to grow and create more jobs.
There is also a potential downside to raising the minimum wage. It could create problems for businesses, especially small businesses. Business groups such as the U.S. Chamber of Commerce and the National Federation of Independent Business insist that minimum wage increases lead to job losses.
When minimum wages are raised, job positions may be reduced to less than 30 hours per week. They then would be considered part-time jobs, instead of full-time ones. That would eliminate wage earners’ employment benefits. Minimum wage increases in large or small businesses can lead to actual layoffs of employees, or cutbacks when positions become vacant.
When employee costs rise, many companies make fewer jobs available in businesses, especially if they can replace their employees with automated machinery. Some equipment can increase employee productivity, while reducing 15 percent or more of jobs. If automation continues to replace employees, it will not stimulate the economy. It will only increase unemployment.
Other forms of technology are also reducing the need for employees. When employees earn more, it can make economic sense for companies to spend more dollars on new equipment that can replace workers.
Consumers may feel the effects of increased wages, too. If minimum wages go up, food prices will probably go up. Increased labor costs will force supermarkets to increase their prices. The portion sizes of canned or boxed goods could be reduced in weight or size of container.
Some people feel that fast food employee wages account for a large portion of a store’s operations. Many people feel that when minimum wages go up, sale prices for food will increase or the food portion sizes will be smaller.
In many cases, inflation will affect both employees and their employers. Minimum wage increases can lead to inflation, causing all products to cost more. If costs rise, some big companies can absorb those costs, at least in the short run, if they have deep pockets. They have the edge for survival, but that is generally not the case for small businesses.
Increasing the minimum wage will be harder on small businesses than large ones. They have fewer employees, and are often quite dependent on the few they have. They cannot compete with big businesses financially, nor can they buy or sell goods cheaper. Small businesses can give more personalized services; they work on lower markups and work longer hours, in order to be competitive. Most small businesses are in local neighborhoods, individually owned or operated as family run businesses.
We need to be sure all working people in our nation earn a living wage, but we also need to ensure the survival of our small businesses. To do both, the government and our communities need to work with our small businesses, and provide loans and support to help them, if wage policy changes put some of them in a tough place.
Neighborhood small businesses should be kept alive to serve local customers. They give friendly and special services that big businesses cannot. Many small business people belong to local churches and synagogues, they serve on non-profit and fraternal organizations, their children attend local schools, and they are active in local government.
We should encourage small businesses to join together and offer special deals on merchandise or services to customers, by advertising in local newspapers and in the groups to which business people belong.
Let’s raise the minimum wage for entry-level jobs and support small businesses now.
— Bernard Featherman is a business columnist for the Journal Tribune and former president of the Biddeford-Saco Chamber of Commerce.
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