Survey: Small Business Will Lay Off Workers if Minimum Wage Hiked

By:  Bob Adelmann
03/20/2014
       
Survey: Small Business Will Lay Off Workers if Minimum Wage Hiked

An employment service learned that unemployment would increase if the minimum wage is hiked by asking those who would be directly affected by an increase in the minimum wage.

Bob Funk, the entrepreneur who founded and now operates Express Employment Professionals (claimed to be the largest privately owned employment service in the country), holds that the best way to determine the impact of a proposed law is to ask those who would be directly affected by it. This method reduces confusion, avoids extended discussions among economists who have never held a real job in their working lives, and eliminates spending on empirical studies designed with the desired outcome in mind. Said Funk:

There’s been a lot of debate and speculation about the impact of a minimum wage increase on job creation. At Express, we decided to go directly to the employers who make those decisions to find out what a minimum wage increase to $10.10 an hour would mean for them specifically and [by inference] for the economy in general.

He surveyed 1,213 small business owners and human resource directors, some 230 of whom pay their employees the current minimum wage of $7.25 an hour. One in five said they would be forced to let some of their employees go, while two in five said they would reduce hiring in the future. Half said they would be forced to raise their prices to pay for the mandated increase.

When he asked just those 230 who currently pay the minimum wage, he learned that four out of 10 of them would be forced to fire some of their current workers and half would reduce future hiring. Two-thirds would be forced to raise their prices.

When establishment apologist and Keynesian economist Paul Krugman looked at the issue, he referred to various studies that showed little if any negative impact that past raises have caused:

There just isn’t any evidence that raising the minimum wage … would reduce employment.

And this is a really solid result, because there have been a lot of studies.

We can argue about exactly why the simple Econ 101 story doesn’t seem to work, but it clearly doesn’t….

Which means that the supposed cost in terms of employment from seeking to raise low-wage workers’ earnings is a myth….

So a minimum wage increase … is actually good policy.

If what he says is true, what are we to make of the fact that, as pointed out by economist Thomas Sowell, when countries have no minimum wage, their unemployment rates are lower than in countries with minimum-wage rates. Switzerland doesn't have a minimum wage, and its unemployment rate ranges between two and three percent. As well, the last time the United States didn't have a minimum wage, its unemployment rate "got as low as 1.8 percent."

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