Minimum Wage Law

 In January 2007 the federal government raised the national minimum wage.  In several places this was old news, the raising of minimum wages months before congress acted.  There is no way you slice it, the rising cost of labor will affect the business climate and how businesses make crucial decisions in 2007 and beyond.

Economically, in theory a hike in minimum wage should be a non-event.  It should be a straightforward inflation adjustment that the business has previously taken into account.  In fact, as inflation makes items and prices the business charges more expensive, one would anticipate wages of workers to automatically increase to match that upward slope created by inflation.  

Depending on whatever side of the fence you are on, the employer side or the employee side, you may see the good or the negative of the minimum wave hike.  The increase in labor costs makes running company more expensive and affects the bottom line to the employer.  To the employee the employer is only being competitive by paying his or her staff a salary that they can live on.  If you own or operate a business but have individuals in your family trying to get by on minimum wage you may find yourself on both sides of this issue many times.

Small business is the hardest hurt business by this upward pressure in salaries.  For companies with a lot of inexperienced, lower paid workers, the cost of keeping staff might shoot up because of state or nationally mandated increases in employee compensation.  Small business companies often operate on a tiny margin of profit and any change in the cost structure might be a lethal blow to their finances.  Moreover the small business model is very competitive and there is limited ability to raise pricing to clients or customers without losing business to a larger competitor who can absorb the minimum wage increase without raising prices.

From a governmental stand point, these are some of the factors that make lawmakers sluggish to increase the minimum wage.  There is already a significant anger in the public for companies that are moving their manufacturing or support facilities over seas to take advantage of low paid labor to keep their bottom line on track.  You ought to know that the cost of employees is a huge issue when a firm is willing to move a lot of their operation to a foreign country and take all of those charges just to get to an employee base that is going to labor below minimum wage.

It is difficult to see from the workers’ perspective how this trend of taking low paid jobs abroad can be reversed.  "We are slow to stop businesses from taking actions that they need to take to compete in the markets. "Passing legislation to halt the exporting of jobs is not a popular concept.  It might ease the situation of the worker in our country but it goes against our aim of letting the free market and capitalism play out.”  Unfortunately, occasionally good people get thrown out of the program when the free market rules.  

American workers only strategy to compete with unskilled workers abroad is to quit becoming unskilled.  By taking advantage of educational possibilities and acquiring useful skills, individuals can enter a new market where those skills will get them a good paying job that is not likely to go overseas because of the specialized skills the worker gives businesses.  So the greatest method for the government to resist the export of jobs which results from high employment costs is not to artificially hold down the market and to prevent free trade.  The best move is to make our people more skilled, more valued and for workers to just outwork their counterparts overseas.  This is capitalism at action at its best and if that line of attack is followed, the conclusion for everybody is a better work force, the retention of jobs in America, and a stronger national economy as well.

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