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Fair Wages Equal Quality Workforce

February 22, 2013

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A deceptive myth told to the general public via our politicians (besides the way unions work) is that raising the minimum wage will cause massive unemployment. Past raises in the minimum wage have done nothing but give the lower and middle class more money to spend while improving employee quality. Raising wages does not cause a higher inflation rate. All but a very few economists agree that a little inflation is good for the economy. Stagnation and deflation are the destroyers of our economy, i.e., exactly what is happening today.

Raising the minimum wage to nine dollars from $7.25 over the next two years, as outlined by the president in his State of the Union message, would have little effect on inflation or unemployment. When half of our work force in the United States is employed in minimum wage jobs, that translates to approximately one-half of our population living below the poverty line. Even a $9.00 minimum wage will not raise a family of four above the poverty level unless two individuals in that household are working full-time jobs. Still their annual incomes will leave them $20,000 a year below the median income in the United States.

In 1986, my wife and I started a convenience store in a state with a minimum wage of $6.25 per hour. (When we sold in 1997, it had risen to $7.25 per hour.). While our new employees were payed minimum wage for the first 30-days of training, they then received regular pay raises based on merit and tenure. After one year’s employment, an employee received a one week paid vacation. The average company retention per employee was 24 to 36 months. Tenured employees reached hourly pay levels above minimum hourly wage requirements.
Because of customer service from employees who were paid commensurate with their performances, our customer base grew annually along with our sales.

Recently on a trip back to that state, we found that today‘s minimum hourly wage is $8.95 per hour. Note: The state’s minimum hourly wage is tied to a yearly inflation adjustment. Interestingly, costs of groceries or dining out are as cheap or cheaper than they are here in Oklahoma. And, there was no noticeable shortage of employees to accommodate customers. In fact, eating out and buying groceries in the markets or shopping for consumer goods were actually 8.5% cheaper because there are no sales taxes. Roads are well maintained, ditches alongside the roads are cleaner. A bottle-and-can refund law and enforced clutter law are participated in by nearly 100% of the populace, saving landfills tons of waste materials. The citizens of Oregon pay income taxes too, but they are formulated on a progressive tax not a regressive one.

The State of Washington’s minimum wage is $9.19 per hour – based on COLA – and that state continues to grow and thrive..

The theory of the Speaker of the U.S. House of Representatives and Republican Senator Marco Rubio, following the President’s State of the Union message, is a blown speculation. Studies by a wide range of economists have shown that not only does employment increase as wages go up, but the people that receive the wage increases are the ones spending it Also, a study by the Center for Economic and Policy Research points out that employer benefits include improved work performance, increase in sales and lowering employee turnover, while minimally increasing prices. As the CLO of Costco said on CBS, “If you have the best people, working very hard because they’re paid better, you spend less on labor not more.’

Entrepreneurs and CEO’s know that laying off employees because of an increase in the minimum wage is the pathway to company stagnation and bankruptcy. Every raise in the federal minimum wage since its inception has expanded the workforce. When people have money to spend, they grow our economy!
Kenneth Wells
252scdp1976@gmail.com

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