As an economist, former military and as a person familiar with government contract work who also owns a couple of food stores in Tampa, I am stunned by the “expectation” of the Obama administration that raising the minimum wage is going to help make things better for many Americans.
First of all, it only affects employees hired by government contractors on newly awarded contracts. The premise is flawed. If a government contractor is bidding on a project that requires him or her to hire low-wage employees — for example, janitors, forklift drivers or warehousemen — the contractors would typically bid the local competitive wage for those types of labor categories. For the sake of argument, let’s say a janitor in the Tampa Bay area now makes on the average $7.93 per hour, which is the current minimum wage in Florida. The contractor bidding on a federal project that requires janitorial services would now have to bid a higher labor rate so he or she may indeed pay a newly hired janitor $10.02 per hour as mandated by presidential executive order. Guess what? The government just increased the cost of the service they are buying, and guess who pays for the additional cost? The U.S. taxpayer.
Now, lets talk about my small food stores. Let’s say I am “forced” to pay my employees (normally teenagers — high school students) $10.02 an hour. Who pays for the added labor cost? The consumer. The same consumer — perhaps the janitor who is now making $10.02 an hour — will now pay a much higher cost for his favorite food. By doing all this all we doing is shifting the poverty line, not eliminating it. I will have no choice but to increase the price of my food items. I have no recourse if I want to stay in business.
Lastly, I would argue that you have to let the power of the economic engine work. You have to allow the system, through tax incentives and investment in research and development, grow the economy, which leads to more jobs. We have to look at ways to provide for more training. Yes, we also have to always stay vigilant and provide assistance to those who fall below the always present poverty line. What many forget is that at least under our Constitution and our economic (capitalistic) model, everyone truly has a chance at surviving and beating the odds. You just have to decide what you want.
Angel E. (Hank) Cintron