16 of 24

Yes

Write now Article Tools

It's true that one of the factors in the decision to hire an employee is how much the employee will be paid or must be paid. It's also true that payroll is a major expense in running any business, unless you are a sole proprietor with no employees who keeps plowing your profits back into the company. However, I think the role of the minimum wage in determining cost of business, service and product prices, and hiring decisions is a bit more complex than most people can or will admit.

Let's face it, running a business costs money, and payroll is one of the biggest expenses an average company faces. However, it is never the only expense, and there are ways to structure expenses such that they are shared more evenly across the board. It never ceases to amaze me that a Fortune 500 corporation will complain about the minimum wage being raised when its chief executive officer is making a thousand times the lowest-ranked employee's salary and when the corporation is not only ensuring the profits of its shareholders but is paying them obscene dividend amounts. There are two obvious areas to cut expenses, right there. As for smaller companies, it is not unusual for a small business owner to take on more expenses than he or she is prepared to handle at his or her business's current level of growth. I feel this is more about good budgeting and good planning practices than it is about how much any one person is being paid.

As for service and product prices, let us not forget that the Fed plays at least as much a role in setting prices as employee wages do. Why? Because the Federal Reserve makes decisions that directly impact inflation. I don't pretend to understand all the mechanisms involved, but many businesses operate at least partly on credit, and if the Fed raises interest rates then even someone who is paying their employees a dollar an hour is going to have to raise prices if they've taken out a business loan or a business mortgage. Other factors include the price of oil and the price of raw materials used by a particular business to produce its products. These may impact federal interest rates and of course they directly impact prices even without other intervention. These issues would explain why prices rise pretty steadily from year to year even though the federal minimum wage is raised perhaps every ten years at best.

If prices increase independently from wage increases, and they do, then this is a separate influence driving up the minimum wage. It's all well and

• 1
• 2
• 3
• next page >>

Add your voice

Know something about Minimum wage: Is it fair??
We want to hear your view. Write now!