Fast Focus: 'What should determine the minimum wage?' Mostly the system works

June 15, 2014 

Ideally, the market should set the minimum wage, which, in fact, works for most workers in the US. But for a small percentage of workers (around 2 percent) the market values their work product so low that the federal minimum wage requires employers to pay them more than what they are worth. Most minimum-wage workers earn this wage for a short time in their lives until they gain more job skills and move on. I earned the minimum wage (at the time) of $1.25 while I was going to college. I eventually ended up with a six figure income, but that $1.25 was very welcome at the time.

Let's agree on one thing: Employers are not welfare agencies; they hire workers for one reason only -- to generate profits for the company. If the total cost of an employee exceeds the revenue generated, that employee will be fired. Raising the minimum wage will do exactly that.

Save your breath arguing that companies can simply raise prices to offset that higher cost. That simply belies your ignorance of economics. Higher prices reduce demand by consumers, leading to even more layoffs. Companies employ economists who calculate how much sales are lost for every penny (yes, penny) increase in prices. Think about it, if your Big Mac costs $10, you will say: "Why not pay a little more and get a better, fancier meal?" Or just go home and throw a few patties on the grill and cook it yourself.

That stuff is obvious to anyone of average intelligence. Less obvious are tactics that businesses use in the face of rising minimum wages. Make no mistake: Raising the minimum wage also affects all higher wages as well. Businesses will respond by reducing, or eliminating, benefits such as matching 401(k) plans and paid vacation. They will also resort to wage compression. What is that, you ask? It is where more experienced workers get smaller raises than they otherwise would have received. After all, there is only so much money available to pay workers. This is particularly agitating to those affected.

-- TOM SEIM, Richland

Tri-City Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service