21 March 2017

What's the Problem?

Last November, the voters in Arizona approved a measure to raise the minimum wage to $10.00 per hour, with additional increases over the next few years.  This was one of those “feel good” measures that passed without anyone assessing the true impact on families, businesses and our local economy.  So what was supposed to happen and what did the measure achieve?

First, step back and ask: What was the problem that the measure was trying to solve?  That was never made clear during the campaign.  For the Legislature, it apparently was to provide more tax revenue.  For the employees, it apparently was to give them more spending money in their pockets.  For the employers, we don’t know.  What really happened?  Well, the Legislature will be getting more tax monies to spend; employees will be getting a percentage of the increase to spend, not the full amount, because of their increased tax burden.  And what are the unintended consequences of the measure?

Employees who were earning the minimum wage received an increase, regardless of their performance, taking away their employers right, and ability, to reward performance.  Employees who were earning a dollar or two above the minimum wage because of their performance, now see themselves earning the same wage as lower performing workers.  To adjust for this forced discrepancy, employers must now raise everyone else’s wages, ultimately causing prices to rise.  This is forcing a rising economy, which eats into everyone’s disposable income, negatively affecting their ability to buy the necessities.

A simpler solution?  Keep wages at a level determined by the labor market, and lower the tax burden.  So, let’s repeal the wage increase, define the real problem, and start putting the economy back on solid footing.

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