Friday, July 24, 2009

How To Increase Unemployment

When the Democrats took over both houses of Congress in 2007 they pushed through a series of annual increases in the federal minimum wage. Lest he appear hard-hearted, the compassionate George W. Bush signed this into law.

Such a bill has zero effect in the Northeast, West Coast, and the heavily unionized states of the Midwest where state minimum wage laws are already higher than the federal law. It was, to be as clear as Lord Obama always says he's trying to be, an attack on right-to-work states-- predominately in the South. It was a successful attempt to make it more expensive to do business in a region that has been doing far better economically than the states with higher wages.

I'll set aside the idea of whether the federal government has any right setting wage floors in, say, Georgia. Instead, let's focus on a salient point from the argument against a higher minimum wage: It leads to higher unemployment among people least able to afford losing a job. The Dems answer is always the same-- despite the fact that it has always been true, this time it will be different, better, and glorious. So, lets see... what has happened to unemployment rates in this 24 month period that the minimum wage has been driven up? I don't think I have to point it out. Not even to Slow Joe Biden.

So today the final stage of this 41% minimum wage increase disaster goes into effect and even the very liberal Metrolina Disturber (part of the floundering McClatchey syndicate) has to at least consider the odd notion that raising an employer's biggest cost area by 41% in 24 months might be a job killer. One item from the article illustrates the issue in real world terms:

“We're already experiencing a decrease in sales because of the economy,” said Tommy Haddock, president of Tri-Arc Food Systems, the largest franchise of Charlotte-based Bojangles' system, with locations from the Triangle to southern Virginia. “When you have an increase in costs with a decrease in sales, it's a double whammy.”

Annual expenses at Tri-Arc, which employs about 2,100 at 40 restaurants, will rise by $1.2 million because of the new minimum wage, Haddock said. The company raised prices by about 3 percent across the board to help offset, though not completely cover, the higher expense...

My guess is that, after increasing the cost of my delicious Bojangle's chicken, biscuits, and sweet tea, Tri-Arc will need to let people go. Absorbing $1.2 Million in new costs with no gain in productivity during a time of zero inflation across a business of just 40 restaurants is a prescription for failure. Tri-Arc won't fail, but the new federal minimum wage increase will fail many of the people who the Democrats swear they were trying to help.