Letter to the editor - Minimum wage hike would be hurtful

Monday, October 15, 2001

To the editor:

Any effort to increase the minimum wage during the current uncertainty looming over our economy would be particularly damaging for small businesses and their employees.

The ills of the minimum wage are quite numerous, and have been extensively documented by economists over the years. A minimum wage increase would hike costs for businesses, with small enterprises hit hardest.

Some businesses might be able to avoid the direct costs of a minimum wage increase by simply not hiring young, inexperienced workers; and instead replacing them through automation, outsourcing or hiring more experienced and productive workers. That, of course, would not be a positive development for those low-skilled individuals excluded from employment.

Most businesses -- particularly labor-intensive firms -- don't have such options. For these firms, increased costs due to a higher minimum wage can result in staff cutbacks, fewer work hours, reduced compensation for other employees, canceling plans for expansion, or even having to close the business.

In the current economic environment -- indeed, as we likely face a recession -- it is appropriate for Congress to move ahead with a pro-growth package of policy measures. These measures should be focused on reducing governmental costs imposed on entrepreneurs and businesses, so as to boost incentives for investing and risk taking. A minimum wage increase would accomplish the exact opposite.

Raymond J. Keating

Chief Economist

Small Business Survival Committee

Washington, D.C.

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