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Wednesday, 24 April 2013 17:10

New Poll Shows Small-business Owners Favor Raising Minimum Wage?

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Quoting the results of a poll funded by a lobbying group known as the Small Business Majority, the Central Valley Business Times (CVBT) of Stockton, California, announced that a majority of small-business owners now support raising the minimum wage. The Times iterated the hoary refrain that such a raise “would enhance consumer spending which can increase the demand for small firms’ goods and services” and added that not only would such a raise “allow low-income workers to more easily support themselves … [but it would also relieve] pressure on taxpayer-financed government assistance programs.”

John Arnsmeyer, the founder and CEO of Small Business Majority (SBM), repeated the theme:

By raising it across the board, more Americans will have more money to spend at small businesses. This will help them create jobs which strengthens the economy overall.

The economic domino effect raising the minimum wage would have would be significant.

Another lobbying group, Business For a Fair Minimum Wage, echoed Arnsmeyer and the Times, claiming that

Increasing the minimum wage will help the economy because the people with the lowest incomes are the most likely to spend any pay increases buying necessities they would not afford before, which will boost sales at businesses.

This will increase the customer demand that businesses need to retain or hire more employees.

Henry Hazlitt, the author of Economics in One Lesson, no doubt thought he had put the matter to rest back in 1946 when he gave this explanation:

You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering.

In brief, for a low wage you substitute unemployment.

A shortcut to understanding the fallacy of the minimum wage is simply to ask: If raising the minimum wage to $9 per hour as proposed by President Obama or to $10.50 an hour as proposed by Ralph Nader makes so much sense, why not make everyone wealthier by raising it to $20 an hour, or $50, or $100?

And so how does a poll, hired and paid for by the Small Business Majority, come out with the exact opposite conclusion? There are clues buried in the poll itself and elsewhere. For instance, SBM holds itself out as being opposed to “stifling diverse voices in favor of ideological rigidity” and has hired pollsters in the past to show that the majority of small business owners are in favor of the Patient Protection and Affordable Care Act (ObamaCare), and that they “believe immediate [federal government] action is necessary to form bold clean energy policies that will prompt innovation, and in effect, stimulate small business and the economy.” It found pollsters to show that “87% of small business owners believe [that] improving innovation and energy efficiency are good ways to increase prosperity for small businesses” and to show that “80% [of them] support [government laws] requiring the auto industry to increase fuel efficiency standards to 60 miles per gallon.”

SBM hired an MIT economist to conduct a survey which found that healthcare reform [i.e., ObamaCare] “would dramatically improve the situation for small businesses — holding down healthcare cost increases, saving jobs, preserving wages, and bolstering profits.”

In June 2010 SBM paid for another study which concluded that most small-business owners “support climate legislation” and are “looking to a partnership with government to help them compete.”

In October 2010 SBM released the result of another study that showed that, in California, small-business owners supported California’s Global Warming Solutions Act which they anticipated would “boost small businesses’ bottom lines and stimulate job creation.”

A closer look at the actual questions asked in the survey paid for by SBM is helpful. One of the poll’s questions was: “Do you agree or disagree that it is not right that people working full time to earn just $15,080 a year at the minimum wage, which is significantly lower than it was in the 1960s, adjusting for inflation?” Another was: “Do you agree or disagree that increasing the minimum wage will help the economy because the people with the lowest incomes are the most likely to spend any pay increases buying necessities they could not afford before, which will boost sales at businesses?”

It should also be noted that in the SBM poll, 85 percent of those polled were already paying more than the minimum wage to their employees.

Studies showing that raising the minimum wage also raised unemployment have stood the test of time, including one done in 1994 published in the American Economic Review and repeated several times since. Indeed, competing studies on the matter concluded that, in the real world, raising the minimum wage increases unemployment, just as predicted by Hazlitt.  

This hasn't slowed down Ralph Nader, who launched his campaign “Catching Up with 1968” which, if successful, would raise the minimum wage to $10.50 an hour. That matches the inflation-adjusted minimum wage of $1.60 an hour back in 1968. He and his supporters have touted the “ripple effect” of such an increase and how 30 million employees would benefit from such legislation. He picketed a Walmart store in Connecticut with 13 of his most ardent supporters but left before a Walmart spokesman could explain that Walmart was already paying more than Nader’s $10.50 an hour: $13.66 an hour, to be exact. And that didn't take into account any bonuses (last year Walmart paid out $770 million to its employees) or the 10 percent discount enjoyed by its employees (worth another $550 million last year).

Austrian Economist Mark Perry took one look at Nader’s rants and wrote:

Wow, if only it was that easy!

And if it really was that easy, would a 60% or 70% or 80% increase in the minimum wage create an even bigger economic stimulus and add even more jobs?

When looking at any pollster’s conclusions it is helpful to discern three things: who’s asking, how are they phrasing the questions, and what’s their agenda?

 

A graduate of Cornell University and a former investment advisor, Bob is a regular contributor to The New American magazine and blogs frequently at www.LightFromTheRight.com, primarily on economics and politics. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. .

5 comments

  • Comment Link Ralyn Speerly Schraceo Saturday, 27 April 2013 10:11 posted by Ralyn Speerly Schraceo

    As a struggling small business owner that was forced to lay off my only employee last wage hike - this is a bunch of crock. Skilled workers won't get a wage hike - all this does is devalue their labor and the dollar. Small businesses will be forced to lay off more workers or worse yet - go out of business because they can no longer afford to pay their employees. Heck we might as well all just go work at McDonalds - the pay is already almost the same as a professional job, thanks to minimum wage hikes.

  • Comment Link REMant Thursday, 25 April 2013 13:29 posted by REMant

    There's lies, damn lies and statistics. MIT is the hotbed of Keynesianism in the US, and the latter, who are latter-day mercantilists, treat notes as if they were commodities, in more or less demand, and of no value if not in use, rather than a reflection of indebtedness, and in use hy the fact of creation. Thus they can argue simply raising the level of debt will ipso facto raise the level of commerce, and ignore completely productivity, the need for savings and the return on its investment, as well as that an oversupply of money can have no effect on prices. It will be seen that monetarism is not essentially different. and should be noted that most of the world's central bankers were trained at MIT.

  • Comment Link Frank M. Pelteson Thursday, 25 April 2013 10:05 posted by Frank M. Pelteson

    It sounds to me as if the Small Business Majority is a Communist Front. I guess 36 years membership in the John Birch Society has educated me to come to this conclusion. You too can join the JBS at http://www.jbs.org/join-jbs/join-jbs . :-)

  • Comment Link Tionico Wednesday, 24 April 2013 21:19 posted by Tionico

    Hazlitt is correct. And Thomas Sowell, in Basic Economics, spends an entire chapter on wage controls, does his own research, and comes to the same conclusion. Take a look around... any task that can be performed by a machine is..... displacing large numbers of workers who could perform the task, but not at the inflated minimum wages mandated by government.

    Another consideration: since taxes are a percentage of both wages paid and cost of goods sold at retail, increasing minimum wage results in the same people doing the same thing paying more income tax, and, since the higher cost of labor raises the cost of producing the goods sold, sales and business taxes imposed on actual selling prices also increase. More taxes means even less available for the "littie guy" barely making it.

    I honestly think these clowns WANT our economy in a pile on the floor. More spent on under-skilled workers, and the resultant higher taxes, will leave even less discretionary spending in the hands of the common man.

  • Comment Link Jenny Lee Wednesday, 24 April 2013 20:50 posted by Jenny Lee

    A good number of companies, at least in South Texas already earn over minimum wage. Those business owners who do not see the big picture may think raising the minimum wage is fine, since they may not have to worry about actually raising any of their employees salaries. However, when the prices go up and the salaries stay the same people and companies will suffer. Just as they have every time the minimum wage has gone up.

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