Opponents focused their attack on labor secretary nominee Andrew Puzder on his failure to support a federally mandated increase in the minimum wage to the levels pushed by the left. There’s good reason he and others with small business experience don’t.
Puzder, who withdrew his nomination Wednesday amid charges he failed to pay taxes on a domestic worker for five years, has real world experience in running businesses staffed largely by minimum wage workers, and understands the pressures a sudden and large hike in wages would have on small business owners who must meet the inflated payroll and customer demand for an affordable product. Puzder is chief executive of the Hardee’s and Carl’s Jr. fast food chains. He told Fox News he is opposed to raising the minimum wage “to the point where lower-skilled workers, working-class Americans, young people, minorities, are losing the jobs they need to get on the ladder of success.”
The $15 an hour minimum wage pushed by activists would do just that, particularly in low-cost, low-wage parts of the country. Small businesses are not opposing such a hike out of stinginess. They know the choices they’ll have to make if costs rise in their low-margin businesses.
At the beginning of the year, the minimum wage increased by 40 cents in Michigan, from $8.50 per hour to $8.90. The increase will give a raise to 188,000 workers, according to the Economic Policy Institute. And although some workers are better off, many people just got priced out of a job.
“The irony of this is the very people we’re trying to help end up getting hurt,” says Rob Fowler, president and chief executive of the Michigan Small Business Association.
Fowler says economics and experience shows small businesses, especially those in the service industry, will have to lay off employees because of the minimum wage increase. Fowler contends wage increases happen frequently and naturally in entry level jobs.
“To attract and retain people businesses are paying higher wages,” Fowler says. “The market always drives wages up.”
Minimum wage workers tend to be teenagers and students, for whom the work experience is as important as the pay.
“The myth is that most people who benefit from a raise in the minimum wage are single moms,” Fowler says. “But the reality is that most people make it for a short period of time and then move up in the wage base.”
A 2014 study by the Congressional Budget Office shows the negative effects of minimum wage laws on the national scale. The CBO estimated that an increase in the federal minimum wage to $10.10 per hour as proposed by Democrats would boost the paychecks of 16.5 million people. But half a million of them would lose their jobs as a result.
The majority of the benefits would go to people above the poverty line. The CBO stated that less than 20 percent of pay raises would benefit the impoverished.
Puzder also took fire in his nomination process for suggesting he favors switching to automation to save on wages. But it is a reality, too, that small business owners will look first to cut overhead before passing on price increases to cost-conscious customers. Technology is too expensive for many small businesses now, but if employee costs rise, it will make that option more sensible for many.
The focus should always be on growing the economy to create a stronger demand for workers, which in turn will drive up wages for everyone.