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Politics : Mainstream Politics and Economics -- Ignore unavailable to you. Want to Upgrade?

To: Wharf Rat who wrote (38993)	2/13/2013 3:20:10 AM
From: Wharf Rat	Respond to of 85487

The Impact of Raising the Minimum Wage by Dave Samuels, Demand Media While politicians on both sides of the minimum wage argument may claim dire consequences for the economy or a boon to the working class if the minimum wage increases, economists believe the effects are often negligible. Because so few workers over the age of 25 earn minimum wage--less than 2 percent, according to the Bureau of Labor Statistics--raising it does not have far-reaching effects on the economy as a whole. However, for small business, multiple studies suggest that higher wages can have more of an impact. Stimulates Small-Business Growth One of the main arguments against raising the minimum wage is that higher wages increase operating costs for small business, so much that it causes enough failures to outweigh the benefits of raising the minimum wage (e.g., more disposable income available for consumer spending and higher tax revenues). However, a 2004 study by the Fiscal Policy Institute determined the opposite result to be true, finding that small-business growth doubled in states with higher minimum wages for the four-year period after the 1997 minimum wage increase. This finding was echoed by economic researchers in "Minimum Wage Increases and the Business Failure Rate," published in the March 1998 issue of Journal of Economic Issues. Their research found that during a 30-year period, there was no correlation between business failures and increased minimum wage during the two-year period following an increase. The researchers further reiterated the FPI finding that a rise in the minimum wage actually increased small-business activity. Affects Productivity When wages rise, more workers enter the job market, allowing businesses to choose more high-skilled workers. This improves a small-business owner's opportunity to improve productivity through the use of higher-quality workers not previously available. Some small-business owners might choose to increase wages by decreasing the number of staffers, a solution that has pros and cons. On one hand, higher pay can motivate better-skilled workers and increase productivity. On the other hand, employees who are overworked are more prone to errors, poor customer service and absenteeism, which can decrease productivity. Increases Price To offset higher employee wages, small businesses may need to raise their prices on the goods and services they sell. This can lead to decreased sales, decreased revenues and lower profits. With less money to spend, small-business owners may have to decrease or eliminate capital improvements, marketing, new hires, bonuses, debt service and production. All of these cutbacks in spending can have adverse effects, such as fewer customers, because of decreased advertising; increased interest payments; and inability to attract or retain salaried employees. References (3) United States House of Representatives Joint Economic Committee: The Case Against a Higher Minimum Wage CNN Money: Minimum Wage, Marginal Impact Economic Policy Institute: Minimum Wage and Its Effects on Small Business