April 14, 2013

Another View: Hiking the minimum wage would stimulate economy

A columnist is wrong to say that paying workers more would fuel inflation and depress wages.


A Maine Voices column titled “When a higher minimum wage works against the lowest earners” (April 4) claimed that “as the minimum wage goes up, so does the cost of everything else.” This is half true and ignores the positive impact that wage increases can have on the economy.

Since fast food/restaurant employees account for seven out of 10 low-wage workers (reference huffingtonpost.com), this industry demonstrates best the real impact of raising the minimum wage. If employees working at a McDonald’s for $7.50 per hour were to receive an increase of $1.50 per hour (raising them to the proposed $9 minimum wage), it would cause a 20 percent increase in labor costs for that restaurant.

But, since labor is less than one-third of the total cost of preparing the product, a Happy Meal (for example) would only be increased by less than 25 cents. (As a former regional controller for Kentucky Fried Chicken, I stand by these figures.)

The claim that “inflation” would hurt the economy is outweighed by the fact that each worker would then have $40 to $60 (depending on their hours) more per week ($2,000-$3,000 per year) to spend on groceries, clothing, back rent, gifts, etc. Multiply that by all minimum-wage earners in the country, and imagine what a boost to the economy it could be!

The writer also stated that “an increase in the minimum wage is simply a wage cut for those people who are earning a higher wage.”

This is blatantly false. If workers earn less than the minimum wage, their employers haven’t been giving them wage increases that keep up with inflation, much less recognize merit.

The more we earn, the more we spend. The more we spend, the better for the economy (Economics 101).

Robert J. Seeber, a retired CPA, is a resident of Windham.

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