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The Honolulu Advertiser
Posted on: Tuesday, March 29, 2005

ISLAND VOICES
Facts don't support minimum-wage critics

By James Weatherford

State Rep. Colleen Meyer is sounding a false alarm based on familiar, if unfounded, warnings about increasing the minimum wage ("Minimum wage hike would hurt everyone," March 27). The oft-repeated siren of minimum-wage doomsayers warns that an increase in the minimum wage would close businesses and cost jobs.

To add to this siren, Meyer spreads before us a game of chance: one pea, three shells. I wonder who owns the pea in this game? Not a minimum-wage worker trying to feed a family on $6.25 an hour. For that family, playing a game with a pea doesn't happen. A minimum-wage worker would rather share the pea with her hungry family.

The shells? Think shelter.

Rep. Meyer, R-47th (Ha'iku, Kahalu'u, La'ie), alludes cryptically to unidentified "studies" that "show clearly" the dire consequences of increasing the minimum wage.

I refer to research by the Fiscal Policy Institute and the Economic Policy Institute that reveals a reality different from the apocalyptic claims of minimum-wage doomsayers.

The research has found no correlation between minimum-wage increases and a rise in business failures, either in the year the increase occurred or in the following year. The economy, especially small business, has done well in the years following implementation of a minimum wage. In the wake of minimum-wage increases in both 1990 and 1997, the U.S. economy had strong growth. Between 1998 and 2001, the number of small-business establishments grew twice as quickly in states with higher minimum wages.

A comparison of states with minimum wages above the federal level has shown that increasing the minimum wage has not resulted in less hiring. Since the minimum-wage increase in 1997, low-wage workers, particularly single mothers, have found employment at increased rates. Those who will benefit most from a higher minimum wage are concentrated among working women, many of whom are single mothers. Among the workers to benefit from a minimum-wage increase, 60 percent are female and 72 percent are age 20 years and over.

The reality is that minimum wages do not cause business failure nor result in job losses, as claimed by the doomsayers.

How does a higher minimum wage affect the economy?

Raising one worker's "minimum wage from its current rate of $6.25 to as much as $8" does give that one worker a "28 percent wage hike." However, for a wage-earning worker now at $6.75 or $7.75 an hour, the pay raise is less than a "drastic" 28 percent.

Nevertheless, about that one worker: Ms. Cleaning Lady would get a 28 percent raise on her job where she empties the trash cans and washes the urinals of million-dollar executives.

Ms. Cleaning Lady might spend some of the extra wage on clothes for herself and her family, or maybe for a new sofa or refrigerator. If she is frugal, she can save some of these extra earnings for her child's high school education. If she is a miracle worker, she can save for the child's college education.

When a low-income worker with minimal material wealth gets an increase in wage, a large part of that increase is spent on basic personal and household items. Purchases of clothes, sofas and refrigerators circulate money in the economy and register demand for these products. Because satisfying customers' needs is what matters most in a market economy, employers increase hiring to satisfy demand generated by increased income.

The economic common sense of workers as buyers, and wages as expenditures, seems to escape minimum-wage doomsayers, who also appear naive to the futility of trying to sell anything to a customer who has no money.

James Weatherford is a resident of Kea'au, Hawai'i. He wrote this commentary for The Advertiser.