Wednesday, January 31, 2007

Companies That Support a Higher Minimum Wage

Great point made over at Free Exchange:

And the Washington Post makes a surprisingly common error in discussions of minimum wage laws:

The chief executive of Costco Wholesale, the nation's largest wholesale club, yesterday became the most prominent member of a new organization of business owners and executives pressing Congress to approve an increase in the federal minimum wage.

Jim Sinegal, a maverick entrepreneur who founded Costco in 1983 and has resisted Wall Street pressure to cut wages and benefits for his 130,000 employees, said he signed onto the effort because he thinks a higher minimum wage would be good for the nation's economy as well as its workers.

"The more people make, the better lives they're going to have and the better consumers they're going to be," Sinegal said in an interview. "It's going to provide better jobs and better wages."

That view opposes the position held by many business groups, which have lobbied against legislation moving through Congress to raise the minimum wage to $7.25 an hour from $5.15. Democrats have placed a high priority on increasing the minimum wage, which has fallen to its lowest level in more than 50 years when adjusted for inflation. The measure has passed the House but is stalled in the Senate, where Republicans have said they will support it only if tax breaks are included for small businesses.

CEO's who support higher minimum wages are not, as the media often casts them, renegade heros speaking truth to power because their inner moral voice bids them be silent no more. They are by and large, like Mr Sinegal, the heads of companies that pay well above the minimum wage. Forcing up the labour costs of their competitors, while simultaneously collecting good PR for "daring" to support a higher minimum, is a terrific business move. But it is not altruistic, nor does it make him a "maverick". Costco's biggest competitor, Wal-Mart, also supports a higher minimum wage, and for the same reason. Wal-Mart's average wage is already above the new minimum; it will cost the company little, while possibly forcing mom-and-pop stores that compete with Wal-Mart out of business. This seems blindingly obvious to me. Though I don't expect we'll see "the minimum wage—it's great for Wal-Mart!" in many Democratic campaign commercials.

Analysts and politicians who work from the premise that 'business' is a monolithic supporter of the free market and open competition always make me chuckle. 'Business' is for whatever makes it more money - which is often a competitive market. But if they can get government to kneecap a competitor without doing damage to their own bottom line, they'll usually go for that even quicker.

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