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Minimum wage hike detrimental

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In the President's State of the Union address, Tuesday, he announced, "...I will issue an executive order requiring federal contractors to pay their federally funded employees a fair wage of at least $10.10 an hour..."

He further suggested Congress should raise the federal minimum wage for the private sector from $7.25 an hour to $10.10, a 38% increase.

The theory that raising the minimum wage will help unskilled labor is shallow thinking. Below the surface, it is obvious that this will in no way help them and will only put the middle class that much further behind.

The raise will increase the cost of doing business for employers such as fast food restaurants, gas stations and grocers. An increase in the cost of doing business will ultimately lead to increased prices of goods and services and/or lay-offs.

For instance, Don Davey, a former NFL player with the Jacksonville Jaguars who owns 13 Firehouse Subs restaurants in Florida, told CBS news that a jump to $10.10 an hour could force him to raise prices or lay off workers.

“We’d be forced to make a tough decision. We may have to close some locations. There would be 15 people laid off immediately if we close one of our stores.”

Jamie Richardson, vice president of White Castle, told CNBC "... [Increasing the] federally mandated starting wage wouldn't be bad for White Castle, it would be absolutely catastrophic."

Such an increase would force the closure of more than 200 of its 406 locations across the United States, Richardson said, with any remaining locations "glowing embers. They would be dying stars."

Common sense dictates that increasing the cost of goods and services to compensate for a higher minimum wage, even for those that already pay more than the minimum wage, will put those employees no further ahead as prices are adjusted but will cost those making more than $10.10 an hour much more, placing them further behind.

With the cost of goods and services increasing, the consumer will have less purchasing power, leading to a decline in said purchases. A loss in the sales of goods and services will only add to greater unemployment.

The last thing we need in an already weak economy is a massive increase in lost jobs and less purchasing.



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