Business Owners, Not Economists

RECEIVED Tue., Aug. 28, 2007

Dear Editor,
    I hope Bill Totah is better at business than he is at economics (“'Shared Prosperity' Is Socialism”) [“Postmarks,” Aug. 24]. A minimum-wage rate doesn’t “ultimately cost jobs” as Totah erroneously asserts. Raising the minimum-wage rate ultimately creates jobs as lower-income workers have a high propensity to spend all of their wages, and that expenditure has a ripple effect throughout the local economy. It’s called a multiplier effect. Each dollar the worker spends can create $2 to $4 of additional income in the local economy.
    The initial dollar spent becomes business income that is spent in turn by the new income recipients, who in turn spend a portion of the dollar, and so on as the original dollar moves through the economy creating additional income, additional expenditures, and jobs. A rising minimum-wage rate is consistent with rising labor productivity.
    Moreover, establishing a uniform minimum-wage rate creates a level playing field for large and small businesses alike. You can pay higher wages for more productive workers, but no large business can compete by cutting its labor costs below the minimum-wage rate.
    While some businesses are more capital intensive than others, I’m unaware of any business that doesn’t require labor to make the capital investment productive. A computer, backhoe, or 18-wheeler doesn’t function without a skilled operator, and I never saw a piece of equipment in a store buying goods and services.
    A typical businessman’s idea of good economic policy is increased capital depreciation, tax abatements, and other corporate welfare schemes. Running a business doesn't qualify one to make good economic policy for the nation.
Charles O'Dell
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