Minimum Wage

The minimum wage discussion sparked by President Obama's call for an increase in the minimum wage is a perfect example of the process that constantly leads this country into adopting a policy that is a primarily a compromise between the two most extreme and inaccurate characterizations of reality rather than a policy that will produce the best results.  

On one side of the minimum wage debate folks say an increase in the minimum wage will hurt small business, and cause poor beleagured small business folk to lay off employees, cut their hours or even close up the business, and thus hurt the economy.

On the other side folks say nonsense, increasing the minimum wage will increase the money in peoples pocket, will help the economy, and won't really hurt business. 

Both sides are about equally right and equally wrong.  In fact using a national minimum wage to make a fairer society and boost the economy is like trying to use a sledgehammer to make an ice sculpture.   

Examples of the misdirected nature of the debate:

1.  Proponents of the minimum wage cite San Francisco, where the minimum wage is over $10.00 an hour and the city taxes business to provide health insurance for all workers.  They say - "See, this proves minimum wages increases will be good".  Folks, get a grip.  San Francisco is one of the richest areas of the country, with a very high cost of living,  Just because San Francisco employers can thrive with a $10+ an hour minimum wage and city business taxes to cover employee's health care doesn't mean businesses can do the same thing in other parts of the country that aren't full of well off single folks with lots of money to spend.  

2.  Opponents of the minimum wage paint all small businesses as running on the edge of insolvency.  They argue the minimum wage will force many business owners to close up shop, or lay employee's off to avoid bankruptcy.  Undoubtedly there are businesses where the profit margin is low enough that the owner won't be able to afford to increase hourly wages for minimum wage workers without losing the ability to make an acceptable profit.  But there are also businesses whose business model is built on exploiting minimum wage workers to create huge profits for owners.  And there are businesses that fit every possible niche between those two extremes.

A better National policy would leave minimum wage laws to individual regional governments, but use the Federal tax code to impose high taxes on income derived from businesses where the owners compensation greatly exceeds the average pay of the employee's.  The greater the disparity, the higher the effective tax rate.   Minimum wage workers would drag down the average salary, thereby increasing taxes on the owners of the business - a strong disincentive to those trying to make their fortune exploiting minimum wage workers.