The Democratic Congress Strikes Again Against the Little Guy

Count another victory for the Democratic Party over the interests of the small businessman.

To get the needed funding approved so our troops could continue to defend freedom, President Bush was strong armed into approving a minimum wage hike from $5.15 to $7.25. Fewer than 1.7 million workers make minimum wage, although the Democrats claim as many as 5.6 million of the nation’s 130 million workers could see their salaries rise. They cannot say for certain because a percentage of those workers will likely find themselves out of a job.

Very few working families rely on minimum wage jobs alone to support their families. The very small number that do qualify for welfare. Many of the rest work such jobs as part of a combination package of part time employment. About fifteen years ago I was supporting a family on two minimum wage jobs and one that paid a few dollars over that. Other minimum wage workers are spouses or significant others of high wage earners who work for a little extra income or to pass the time.

Before anyone starts talking corporate greed, they must understand that the majority of major corporations already pay over minimum wage. Most businesses that pay minimum wage operate on a small scale. Local bookstores, restaurants, and other small city downtown establishments pay minimum wage. One can hardly accuse these businesses with their razor thin profit margins of “corporate greed.”

How does a small business like this cope with the hike? It lays off workers while the owner him or herself works more hours. Since the cost of labor represents such an important factor in a business’s profitability, the extra pay obligation may be the determining issue in whether or not a small business fails. Certainly it presents a higher obstacle to an entrepreneur just getting started. Some owners already pay employees “under the table” and raising the minimum wage only encourages more skirting of the law. Others will pass the costs onto the consumer. Beware parents with children in day care settings, your bill is about to go up.

For the most part, the market has determined that low level service employees of companies such as McDonalds will make almost what the projected minimum wage hike will be. That means the Democrats did not overly antagonize their big business donors. As usual the small businessman bears the brunt of liberal victories over “corporate greed.” They should be sure and send a letter of appreciation to their Democratic representatives in Congress.

A healthy dose of Capitalism is needed in West Virginia

Location, location, location are the three most important things for any business. Looking at the state as a business, we have one of the best locations of any state. We are located in the center of 2/3rds of the US population, so why do we rank 47^th real GDP growth?[i] The simple reason is we no longer practice capitalism in West Virginia, we practice mercantilism. For those that forget their history, mercantilism imposed by the British crown was one of the primary reasons for the Revolution, but we did this to ourselves.

In order for West Virginia to take advantage of our location we need to reduce government’s interventionism in the economy. Businesses large and small must be free to make decisions based on profit and loss. Currently they are held hostage to the state by policies not conceived in sound economic principles, but by political prejudice and special interest.

A proposed increase in the minimum wage law is a good example of government interference causing more harm than good. During the 2006 session I had a conversation with Senator Jon Hunter about the proposed increase. Jon thought this would be good for the states lowest paid worker giving them a pay increase, but that is not the reality. The reality is many of the states lowest paid workers will lose their jobs. Simple economics is the reason. As wages are artificially increased without a corresponding increase in business growth or productivity, then the simple solution for any business is to compensate by cutting the work force. This creates additional unemployment. Instead of getting a pay increase, the lowest paid workers loose their jobs. These jobs will be gone until market forces come back into balance which is when the economy can actually support the new minimum wage.

I believe the answer to bringing capitalism back to the state is through education. I have known Jon for a long time, and he is a smart individual, but you only know what you have been taught. I doubt Jon was ever taught how capitalism works. I, myself, am a product of the West Virginia school system, and at no time can I ever remember being taught capitalism. Even in college, the focus was on business law, corporate responsibility, preparing a balance sheet, etc. I learned capitalism on my own. In the different systems of the world this is unusual. In the days of the Soviet Union, and in modern Cuba communism is taught in their schools, France a socialist county, socialism is taught, but we live in the most successful capitalistic nation and capitalism is not taught in our school system. By 8^th Grade Cuban students can tell you who Karl Marx and Lenin are, can a West Virginia 8^th grader tell you who John Locke and Adam Smith are?

The key to a thriving future West Virginia economy is education in our own capitalistic system. A populous with a working knowledge of free market capitalism, and sound economic principles will see that government interventionism is a bad thing. Through the process of education we will create a class of entrepreneur that will use our resources to create jobs and grow the economy from within the state.

[i]Bureau of Economic Analysis, US Department of Commerce, 1997-2004