A recent letter writer endorsed the increase in the minimum wage proposed by the Obama administration as almost a cornucopia of benefits for the general economy.
I would like to offer an alternative evaluation.
First of all, if an increase in the minimum wage to $10.10 from $7.25 has enormous benefits for all, i.e. higher government tax revenues, higher personal income leading to higher spending and greater economic growth, and an increase in employment, then why not increase the minimum wage to $15 or $20 per hour?
We could "solve" the budget deficit with a minimum wage of $30 or $40 an hour since the writer's perception of increased minimum wage has no negative consequences.
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Any reasonable person will recognize that there is some wage that maximizes employment and rates. Above that wage will serve to reduce employment.
Hardest hit with an increase in the minimum wage would be the low-wage worker who would probably lose his or her job with companies like McDonald's that would have to increase the price of a hamburger to make ends meet.
When a price increase or equivalent is implemented across low-margin businesses, unemployment rises, government welfare payments increase and the deficit rises, not falls. Corporations, faced with soaring personnel costs, would accelerate the replacement of people with machines and further aggravate the trend toward a lower labor participation rate.
Thomas E. Nugent
Hilton Head Island