Tuesday, July 28, 2009

Will the Minimum Wage Keep the Economy in Recession?

As of July 24th the federal minimum wage will increase from $6.55 per hour to $7.25 per hour. This will have a negative impact on the economy and will prolong the climate of job loss that we are already suffering through.  There is a "feel good" sentiment concerning raising the minimum wage because everyone approves of people at the lower end of the economic scale making more.  Here is the problem and the reason that this will harm the economy and especially the lower income earner.

When a business is faced with a tax hike or an increase in wages it is paid one of two ways, neither of which is buy the business itself.  The cost are either embedded into the cost of goods and services which, in turn,  raises the price of things we use or purchase or businesses learn to operate with less staff which causes job losses.  The idea that businesses in America, the majority of which are small businesses, just absorb the cost of these things is not realistic. 

Because Congress did not delay this increase in the height of this recession, job losses will not doubt increase and the depth of these losses will be prolonged.  Those Americans that this wage increase was designed to help will be closer to poverty than ever.  There is another way to raise wages in this country.

Real wages will increase when business is given an environment to invest and create without the smothering hand of a burdensome tax system that penalizes the very things that create wealth, spur investment, and raise wages.  A real prescription for the healing of our ailing economy is to reign in taxes, reign in an intrusive government, and to reign in the out of control agenda of Democrats and to restore an environment where achievement and production are rewarded.  Only then will real wages rise in a sustained growth that has a real impact on ordinary Americans.

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