Business and Employees have Shared Interests

Jan. 16, 2007— -- The fundamental problem with the Democrats' dogged pursuit of a minimum wage increase is much larger than the difference between $5.15 and $7.25 per hour.

Every penny of the House-approved $2.10 increase represents more than a simple legislative victory—but instead a methodical attempt to drive a wedge, in the minds of the American people, between the interests of "corporate" or "business" America and the American "worker."

Democrats touted this vision time and again in the 2006 elections, so we shouldn't be surprised to see part of it implemented now that they hold power in Washington. This is what they promised to do, and it looks as if they're on their way to doing it. Good for them. But is this legislation—and more importantly, the ideology behind it—good for the country?

Well, at minimum, no.

One can no more separate "corporate" or "business" interests from those of "workers" than one can separate celebrities from tabloids. To run with the analogy, celebrities need tabloids to generate interest in their off-screen lives; this helps their careers. Tabloids need enough debauchery from celebrities to capture the attention of supermarket shoppers; this helps them sell magazines. An imperfect relationship? You bet. But does it serve the interests of both parties? Absolutely.

The same is true of the relationship between "corporate" America and the American "worker." How, exactly, would an entrepreneur build a company without capable "workers"? How, exactly, would the average worker find employment without the jobs created by corporations?

In that place where we keep our common sense, we know the truth about the nature of this symbiotic relationship. But you wouldn't know it by listening to the rhetoric surrounding the minimum wage debate. Consider the words of AFL-CIO president John Sweeney:

For the past 10 years, Republican leaders have held the minimum wage hostage, corporations and wealthy Americans have gotten their rewards. Now it's time to do the right thing for low-wage workers, with no payoffs to business.

To what "rewards" does Sweeney refer? Could it be the financial success that comes from taking risks, building companies, and running efficient businesses? If so, Sweeney should remember that corporations and "wealthy" Americans haven't merely "gotten" their rewards, as if some Grand Poobah handed out money like Halloween candy -- no, they have earned whatever "rewards" they now enjoy.

And they do not enjoy those "rewards" alone.

Corporate success leads to job creation, which leads to the natural distribution of wealth, which leads to a more prosperous country for all to enjoy. Thus, policies that encourage job creation and reward financial success are ultimately the "right thing" for workers -- not artificial, government-mandated pay raises.

In fact, as James Shek of the Heritage Foundation points out, a minimum wage increase actually "harms… workers' job prospects for years after it takes effect" because it "discourages businesses from hiring the least-skilled workers who need the most assistance." Ultimately, Shek continues, this loss of "access to entry-level positions deprives many unskilled workers of the opportunity to learn the skills they need to advance up a career ladder."

So, in forcing businesses to do the "right thing" for workers, the government creates circumstances where there will be… fewer jobs for those workers.

Such unintended consequences are consequences nonetheless, and we all must properly understand them as such.

Consider a real world example.

Say Bill's Pizza Shop has $1,000 per week to pay his employees, all of whom earn the minimum wage. When a new minimum wage takes effect, Bill's employee costs will increase by 41 percent. Yet he does not have any more money to pay his workers. Instead, Bill has some questions to consider. Will he need to reduce the number of employees on his staff? Limit the hours he operates his shop? Forego plans to open a second shop (and hire an additional staff)? Ask some employees to accept pay-cuts to compensate for the wage increases of others?

The point of this rudimentary example is to remind us that the interests of businesses and workers are not two separate entities -- no matter what you might hear coming out of Washington in the coming weeks.

Steve Muscatello is a contributor at Townhall.com