Karl Dickey
Chairman, Libertarian Party of Palm Beach County
December 24, 2006
You don't need a degree in economics to understand the dire effects of an increase in the minimum wage. Proponents of a minimum wage hike will argue that the working class of America needs and deserves a raise, but with a simple example I plan to disprove this argument. Let's say, for example, I own a lemonade stand and I pay one of my employees 25 cents per hour, the going rate for lemonade squeezing. Then all of a sudden the fictitious governing council of lemonade stands mandates a pay increase of 25 cents, pushing my payroll costs to 50 cents per hour. My small business is in a predicament. How am I going to subsidize that pay increase? The lemonade stand has not increased its revenues or profit margin with the wage increase: It only increased the costs of running the stand.
Since the government will not subsidize my labor costs for its arbitrary increase, I will either have to increase prices, thus decreasing the purchasing power of my customers, or downsize my staff. Neither reaction is positive for the working class.
In addition to employees making minimum wage, any workers with more skills farther up the job chain will want their salaries adjusted also. Every single individual working for my lemonade stand will receive a raise, while they have not increased their skill set or proven any more loyalty than before.
Though my example may be silly in nature, it reflects on the federal minimum wage policy being introduced in Congress. Small business is the lifeblood of the American economy and the largest employer. Let our congressional representatives know that you understand the importance of small businesses to our economy, and the harmful effects of a minimum wage hike.
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