News Column

Minimum Wage: Leg Up from Poverty Isn't Simple

Feb 18, 2013

Jeff Ostrowski

When President Barack Obama urged Congress last week to raise the minimum wage, he painted the proposal as a straightforward way to "raise the incomes of millions of working families."

But lifting the working poor out of poverty is never as easy as simply requiring employers to pay more, economists and business lobbyists say -- if it were, we would have legislated away financial hardship years ago. The minimum wage is an ever-contentious topic that lends itself to soundbites but no easy solutions.

University of Florida economist David Denslow, a registered Democrat, thinks raising the minimum wage is a misguided policy, a "blunt tool" that misses its mark of helping workers at the bottom of the income scale by redistributing wealth from affluent business owners.

"I think it's probably a bad idea, and most economists do," Denslow said. "But on the other side, it makes us look so stingy and mean-spirited that it's not worth fighting."

Business groups such as the National Federation of Independent Businesses aren't worried about seeming miserly. Since Tuesday's State of the Union speech, they've bashed Obama's call to boost the federal minimum wage from $7.25 to $9 by the end of 2015.

NFIB/Florida Executive Director Bill Herrle called the proposal a "job killer" that would hurt the working poor by forcing employers to hire fewer low-wage workers.

"A government mandate such as this would need to be completely absorbed by small business owners, who are already operating on razor-thin margins," Herrle said. "Small firms cannot pay a worker more than the value the worker brings to the firm."

The White House estimates that 15 million workers would get a raise if the minimum wage were to go up. In Florida, an increase would affect about 1 million workers, Denslow said.

Many of those minimum-wage workers aren't the heads of household that Obama referred to. High school and college students, for instance, fill a significant number of minimum-wage jobs, and giving them a raise does little to lift the working poor out of poverty.

"Minimum wage jobs are rarely someone's full-time, permanent job," said Mark Wilson, president of the Florida Chamber of Commerce.

In Florida, the effect of a pay raise would be muted by a state minimum wage that is higher than the federal rate.

Florida's minimum wage, which is adjusted every year to reflect changes in the cost of living, stands at $7.79 for 2013. If the wage continues rising by 2 percent a year, it would reach $8.27 by Jan. 1, 2016, 73 cents below Obama's target of $9 for that date.

The very fact that Florida has its own minimum wage reflects the messy politics behind the issue. Florida voters haven't sent a Democrat to the Governor's Mansion since 1994 -- yet they overwhelmingly passed a state minimum wage law in 2004.

The opposition of Denslow, a Democrat, illustrates those mixed feelings. So does the support of Dean Lavallee, a restaurant owner and registered Republican.

Lavallee runs the Park Avenue BBQ chain, and he said boosting the minimum wage is a fine policy, one that could raise living standards for low-income workers.

"I've always been for higher minimum wages for the lower end of the economy," Lavallee said. "I don't see that as being a make-it-or-break-it issue for Park Avenue BBQ. We want our employees to have a living wage."

Restaurants are on the front lines of the minimum wage debate. Lavallee pays few of his employees the minimum wage; keeping good workers requires paying more, he said.

"You can't function in any business model without competent employees, and you can't have competent employees without a living wage," Lavallee said.

He predicted that a higher minimum wage would come from business owners' bonuses. But Paul Emmett, president of the Duffy's Sports Grill chain, said some of the cost would be passed on to consumers in the form of higher prices for burgers and salads.

"It certainly is inflationary, and it's going to affect pricing for everybody," Emmett said.

Some of the costs of higher wages inevitably are shouldered by consumers, and that illustrates the ripple effects that can come from regulations on pay for low-wage workers.

"I'd rather see more use of the earned income tax credit," Denslow said.

The earned income tax credit can cut a low-income worker's income tax below zero and lead to a payment from the government. Because the credit is based on a family's income and number of children, it doesn't benefit college students from middle-income families or other minimum wage workers who aren't poor. Denslow said that makes it a more precise poverty-fighting tool than the minimum wage.


Distributed by MCT Information Services

Source: (c) 2013 The Palm Beach Post (West Palm Beach, Fla.)

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