Sunday, April 13, 2014

Alison Lundergan Grimes is Wrong on Minimum Wage

Alison Lundergan Grimes's argument for increasing the minimum wage reflects the doe-eyed naivete that has characterized her campaign:  the policy she advocates would actually hurt those she purports to help.

It's as if Grimes thinks that the government can outlaw poverty by ordering businesses to give workers a raise. Why stop with just the minimum wage?  Let's give everyone in Kentucky a raise!

In Grimes's op-ed in the Courier-Journal, she makes the spectacular assertion that raising the minimum wage would create jobs, when in fact, it  would do the opposite.

Grimes's inability to grasp basic economic concepts such as the laws of supply and demand underscores that she is not ready to lead. The cost of labor is no different than the cost of raw materials.  When the cost goes up, an employer has three choices:  (1) cut the number of employees -- either by firing existing employees or declining to hire new ones; (2) cut workers' hours; or (3) pass along the increased labor costs to consumers by raising the prices for goods or services.

Grimes points out that more and more Kentuckians are working minimum wage jobs.  But that is just a function of the "Obama recovery."  The last thing that Kentucky businesses need is more government regulation making it more difficult and more expensive to survive. To the contrary, for Kentucky to attract new businesses, we need to cut taxes and regulation -- which is why Kentucky needs to flip the House.

Though she pitches her argument to Kentuckians, Grimes is advocating the national minimum wage increase that Obama has been seeking. Plainly,  Grimes and Obama are of the view that Washington knows best and one size will fit all, thereby preventing Kentucky from using our lower cost of living and lower labor costs to lure businesses here from higher labor states like New Jersey (which is reaping the disastrous effects of increasing its minimum wage).

Grimes's makes the argument that "[p]rivate-sector leaders, including Gap. Inc. and Costco, have independently raised wages for their workers, including Kentuckians right here in the commonwealth."  (Note to Grimes:  we all understand that Kentuckians, by definition, are "right here in the commonwealth." Stop treating voters like we're stupid.)  But as to her point about Gap and Costco, that  illustrates that employers can raise the minimum wage without government compulsion.  If an employer like Gap or Costco wants the best workers, it will pay more to get them.  That's how supply and demand works.

Grimes then goes own to assert that 'recent polling shows that a majority of small business owners support increasing the minimum wage."  Again, Grimes's point undercuts her argument; if a majority of business owners want to increase wages, they are free to do so.  There is no law or regulation preventing them from doing so.  And if Grimes's assertion was true, it would already have happened, and other businesses would respond in kind by similarly offering higher wages.  The reality in the age of Obamacare, however, is that businesses are struggling to keep open under its onerous costs; the last thing they need is the government mandating that the cost of production and services go up even more.

Grimes ignores that minimum wage jobs are an entree into the workforce.  They offer employment experience for young people and women who may be returning to the work force after having taken time off to raise children.  A minimum wage job offers much more than just the wage -- it is an opportunity to get a fresh line on the resume showing recent employment history, a chance to earn a reference so that one can eventually move on to a higher paying job.  An employer will be less likely to take a chance on a worker if the government forces it to pay a wage for which that worker may not be able to deliver value.

Perhaps most disturbing about Grimes's and Obama's characterization of the minimum wage is the unspoken assumption that workers will stay stuck in minimum wage jobs, permanently.  To be sure, Obama and Harry Reid have created an economy where entrepreneurs are loathe to take a risk, start a business, hire new employees. Wages are stagnant and employment is such that huge chunks of the potential workforce have simply given up looking for a job. Yet Grimes wants to go to Washington to help Obama and Reid do more of the same.

Senate Republican Leader Mitch McConnell understands that the best way help minimum wage workers is through economic growth and innovation that only comes when we cut the shackles of government regulation and taxes.  The best way to help a minimum wage worker is not by mandating a raise -- which might get that worker fired -- but by creating an economic environment whereby the minimum wage job is a first job, not a sentence for life.