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Midlands Voices: Beware negatives of wage increase

Midlands Voices: Beware negatives of wage increase

The writer, of Omaha, is president of Nebraska Taxpayers for Freedom.

Nebraskans planning to vote in the Nov. 4 election should understand the many negative consequences if the ballot issue for a minimum-wage increase were to pass.

The proposal would raise the minimum wage by 24 percent in less than 1½ years. This raise is not indexed for inflation.

Few Nebraskans earn the minimum wage for very long because of our low state unemployment rate. The Bureau of Labor Statistics states that only 32,000 Nebraskans earned the minimum wage in 2012. Only a small percentage of adults earning the minimum wage are primary breadwinners in their families.

The Congressional Budget Office notes that many low-wage employees do not live in poor families, that fewer than 20 percent of workers who would benefit reside in households that live below the federal poverty line. The poverty-eradication argument is hollow. Some lack the will and initiative to access higher-paying jobs.

Labor unions relish the snowball effect of a minimum-wage hike by demanding a higher wage at specific levels above the minimum. Many union contracts index to the minimum wage, so union workers gain automatic wage increases.

Because not all entry-level jobs fall under federal minimum- wage laws, less-skilled employees priced out of their jobs after a rise in the minimum wage could find employment in the uncovered job market but at less pay.

And a raise in the minimum wage would curtail the number of entry-level jobs created. Economists have concluded that increases in the minimum wage reduce job opportunities for the lowest-skilled employees. Part-timers would lose jobs first. One’s minimum wage is zero if unemployed.

Minimum wages are only a beginning point for most workers; 66 percent of those starting there earn more within a year, according to MinimumWage.com. Imagine the frustration among minimum-wage employees who have worked for this wage for a year or longer and see new employees earn the same higher wage.

For each 10 percent hike in a state minimum wage, teen employment decreases by 3.6 percent or more, research shows. Many workers earning the minimum wage are high school students needing entry-level work to obtain work experience and training and to save for college.

Salary compression would force wage hikes throughout a company. Pressure on employers to raise the wages of higher-paid employees — wage inflation — would seriously erode profits. Increased labor costs mean lower business profits, which leaves these businesses less money to invest in job creation and business expansion.

Hiking this wage would increase the price of goods and services for all Nebraska consumers, cutting into savings. Small businesses like fast food and other service industries would raise prices, losing current and potential customers.

Retailers would reduce staff and replace humans with machines, reduce fringe benefits like health insurance, and restrict personal and sick leave options.

Machines in fast food and other restaurants now can slice toppings like tomatoes and pickles and place them on burgers. These machines are more consistent, sanitary and faster than humans. Machines take no sick leave, require no health care and work 24 hours, seven days a week.

As labor costs rise, employers increasingly would use electronic checkouts at grocery stores and robotics in communications.

Employees in the hotel, motel and fast-food industries would suffer reduced work hours and job elimination, the very people who have no skills to obtain other employment. Many hospitality and retail businesses that pay minimum wage operate on thin profit margins and would cut staff.

Almost 40 percent of business owners who now pay the minimum wage stated in a March 2014 survey that they would fire employees to cover the cost of wage hikes.

Raising the minimum wage would curtail the amount of work available. Many minimum-wage service workers would join the ranks of buggy whip makers from the past century.

Income tax credits for low-wage workers and tax policies that encourage asset development and savings for the poor are better alternatives.

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