Surprising truth about minimum wage: It hurts workers, taxpayers

Surprising truth about minimum wage: It hurts workers, taxpayers

by
Wayne Hoffman
July 27, 2009
Wayne Hoffman
Author Image
July 27, 2009

Earning $6.55 an hour doesn't sound like much, but for more than 50 people employed by the state of Idaho, a steady job adds robustness to life spent in a state institution for the developmentally disabled. That work experience is being jeopardized because of Congress' decision to raise the minimum wage to $7.25 an
hour.

Idaho Department of Health and Welfare spokesman Tom Shanahan said some residents at the Idaho State School and Hospital at Nampa and at the State Hospital South at Blackfoot are hired to do odd jobs, and they're paid minimum wage. Jobs like washing cars add a dimension that improves the quality of life of the residents.

"It does give them satisfaction having a job a couple of hours a day," said Shanahan. But Shanahan said clients will soon find their hours slashed because there's not enough money for the department to keep the jobs intact and to raise wages in compliance with the new federal wage law, which took effect Friday. The 10.7 percent increase is too much to absorb in the agency's already-austere budget, he said.

Similar decisions are being made across Idaho - in business and in government.

According to the state Department of Labor, there are about 40,000 workers who have been earning less than the new mandated $7.25 minimum wage. The state of Idaho employs more than 360 who have been earning less than the new minimum. In addition to the Department of Health and Welfare, others are employed at Eastern Idaho Technical College, Lewis-Clark State College, Boise State University and the Lava Hot Springs Foundation.

I suspect that many of those on school payrolls are students, who stand to be hurt by the increased pay rate. If their hours are slashed, they'll earn the same money they've been earning but pay the higher costs for goods and services as a result of the minimum wage increase.

City and county governments also employ low-wage earners who have been bringing in less than $7 an hour. Thousands more state and local employees earn between $7.25 and $8 an hour. They're not getting raises, but there will be mounting pressure to compensate these employees more because it would be unfair and demoralizing for good, hard-working employees to get nothing when their counterparts are making more. The state of Idaho employs more than 300 people earning between minimum wage and $8 - those denied raises while their peers clock in with up to 70 cents an hour more.

In my business, I wouldn't hire Congress to make copies, let alone set the wages of my employees. Congress has slightly more business acumen than Michael Scott of "The Office" and a lot less than my dog. But by some strange twist of fate, we've asked Congress to be the boss, to have the power to run our companies and, from Washington, D.C., make such monumental decisions as how much to pay employees in Idaho and elsewhere. This is the same Congress that thought government bailouts of banks and automakers were a good idea.

But congressional collectivist mentality leads to legislation that forces business owners to figure out how to squeeze more money out of bottom lines already stretched by the recession.

Businesses from Boise to Idaho Falls are telling stories about how they're facing the prospect of cutting employee hours because they can't afford the new pay rate.

And now taxpayers are being compelled to pay more to thousands of employees in state, city and county governments at a time when those governments are laying off employees and curtailing services.

The higher wages only compound the pressure to raise taxes and fees, or to fire workers or reduce their hours.

For generations, researchers and economists have debated the impact of government-mandated wage hikes. I tend to agree with those who say that increasing the minimum wage merely disrupts free markets, results in higher costs for businesses, higher costs for products and fewer jobs for low-skilled laborers. I have yet to meet someone who benefited through the minimum wage, but I can see plenty of examples of Idahoans being hurt more than they're helped.

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