Downside to higher minimum wage

As we as a nation now find ourselves off the starting block of the 2016 presidential election, even the Republican hopefuls are taking on the issue of poverty. The solution to the plight of the poor, from the perspective of the Democrats, seems to be raising the minimum wage. 

President Barack Obama, in his State of the Union address, said, “Let’s give America a raise.” Gov. Andrew Cuomo of New York wants to raise the minimum wage to $10.50 outside of New York City and to $11.50 within, indicating it would eliminate poverty in the state. Politicians throughout the country are picking up some form or other of the mantra. 

My rough calculation of take-home pay for a single mother with one child at the $11.50 an hour rate working 40 hours a week is about $24,000. Hardly a sum that, as Mr. Cuomo states, would allow her to pay rent and buy food in New York City. Under the Affordable Care Act, it is unlikely that someone would work 40 hours a week, but 29 hours, so mandatory company paid insurance would be avoided. In that most likely circumstance, take-home pay for a single mother with one child would be around $20,000 per year. (Income includes earned income credit.) Why bother with the facts when the rhetoric sounds so good.

Do you actually believe that those companies providing products and services are going to absorb the increased costs attendant with a government mandate of across-the-board wage increases? Of course they aren’t.  Prices will rise to pay for these government-mandated hourly wage adjustments. Are McDonalds, Burger King, Macy’s, Target and the like going to see their expenses rise without some counter action such as raising prices or doing with less staff? No! 

We are all going to pay for the increase as consumers. Even if you have a middle class job that gets no wage adjustment.

In my view, a plausible way to see wages rise is to have robust economic growth, providing labor with more leverage in the demand and supply equation of wages.  A level of growth, that after $10 trillion dollars of deficit spending and economic easing, the government has yet to produce. For government does not create jobs in the private sector. It can only aid that goal by providing an environment in which businesses can and will create well paying jobs. 

This approach has been lost on the Democrats and is fast losing favor with the Republicans as both political parties search for the rhetorical formula that will bring them the White House in 2016.

Howard Ring lives in Riverdale. Point of view is a column open to all.