Does America's Economy Depend on Failed Business Plans?

Whenever the issue of minimum wage or overtime pay comes up, right-wing think tanks such as the Cato Institute and the American Enterprise Institute, plus the Chamber of Commerce, join forces with impressive sounding articles—all of which rail against raising wages for the lowest earners among us. We are then treated to a sad collection of businessmen claiming that any such raises will put them out of business. "Can't afford it," they say, "It'll make us uncompetitive!"

Really? Just which competitors will you be uncompetitive with? It can't be foreign companies, because you've already shipped those jobs overseas--to take advantage of third-world slave wages. It can't be domestic companies, because the wage laws will be the same for them. So, who is it that will now offer lower prices and make you uncompetitive?

Another argument is that higher wages will cause reduced employment because the companies, in protest against increased labor costs, will lay off workers. So, why do they have these employees if they can now dispense with them? It's hard to imagine that businesses are so generous as to give employment to people they don't need. In addition there are at least 64 reputable studies^* that show this claim to be false.

"It could result in higher prices to the consumer," is another complaint. Isn't it strange that prices keep going up even as wages are kept low? Trips to the supermarket verify this all too well. In fact businesses spend little time worrying about the cost to the consumer, unless it's to see how they can be raised. They are, however, very concerned about the prices charged by their competitors. If all producers have to use the same wage scale, simple logic dictates that no producer will have the advantage in labor cost structures.

The irony in all this is that Congressional opposition to a minimum wage increase (heeding the call of their corporate masters) causes the neediest in our society to seek public assistance in order to survive. This in turn causes the additional expenditure of billions in taxpayer money to fund these programs. The Republican answer is to cut these programs while they unabashedly beat the drum for yet another pay raise. Since 1988 Congress has raised its own pay (currently $174K/year vs. $14.5K/year for a minimum wage earner) fifteen times while raising the minimum wage just three times.  

The time has come to call the bluff of these companies and their political lackeys. Any business plan whose success is predicated on keeping wages below the poverty line, or free overtime, does not deserve to survive. In reality, they are only one step above the southern plantation model—the owners of which were willing to go to war to preserve their labor cost structure. How far are these current profiteers willing to go to preserve theirs?

* https://ideas.repec.org/p/dkn/econwp/eco_2008_14.html

Raff Ellis, an MBA degree holder, is a retired CEO of a hi-tech company