The Great Debate on Minimum Wage (VIDEO)

“Who benefits from a minimum wage increase – American workers or Government?”

By Heather Hughes

According to the US Small Business Administration, small businesses employ about half of the country’s private sector workforce. This may be the clearest argument against raising the minimum wage. Heather Hughes recently appeared with Ron Unz, Chairman of Higher Wages Alliance, to discuss raising the minimum wage on CNBC. As a free market thinker, Hughes believes we should “let each State decide what’s best for them. What’s good for California may not be good for Maine.” However, there are a lot of people that believe when you raise the price of something (tobacco, alcohol, bullets, etc) you discourage the consumption or activity. Would a minimum wage increase discourage hiring?

Ron Unz is a mo’ money man on the minimum wage. This semi- Republican, semi-Libertarian entrepreneur turned activist is collecting signatures for an initiative to raise the state’s minimum wage to $12. Unz believes the fundamental law of capitalism is that if workers have no money, businesses have no customers. That’s why the extreme wealth gap in our economy presents not just a moral challenge, but an economic one too. In a capitalist system, rising inequality creates a death spiral of falling demand that ultimately takes everyone down. Everyone honest admits that some jobs will be lost. The question is whether it’s a cost worth taking.

Daniel Zumarraga of Zuma Distributors isn’t sure. “As a small business owner, an increase in minimum wage would benefit no one except federal and local governments. People don’t seem to consider the tax effects at all levels of the spending cycle. With an increase in wages, we would not only pay a difference in labor cost, but would have to pay a higher FICA (Medicare and Social Security Tax) payment. Our employee receiving the increase in wages would also be receiving an increase in their own personal income tax, Medicare and Social Security Tax.” Zumarraga wants to employ as many people as he can, but a raise of the minimum wage on entry level jobs would create barriers for entry in the labor force.

In the fast food industry, which never ceases to grab the most media attention regarding this debate, Zumarraga fears The Dollar Menu at McDonalds would easily become the “Two Dollar Menu.”

So who benefits from a minimum wage increase – American workers or Government?