Steve Chapman

Among liberals who have reservations about free trade, the usual complaint is that U.S. companies will migrate to Mexico or Colombia to obtain cheap foreign labor. But if one company will pack up its assembly lines and move them thousands of miles to alien lands to reduce wage costs, why wouldn't another company redesign its operations here to do the same? Why would it passively accept a hit to its bottom line?

It's been argued that restaurants are likely to absorb the increase because they can't move abroad. True enough. But shutting down is always an option. A lot of fast-food outlets are only modestly profitable anyway. Burger King, Wendy's, KFC and Arby's closed more restaurants than they opened last year. Higher labor costs will mean even more vacant buildings -- and fewer jobs.

It's true that the smaller the legislated increase the less the effect on hiring and firing. But less effect is not the same as zero effect. A small minimum wage boost would not cause a big increase in unemployment, but only because it would not produce a big increase in the earnings of the affected workers.

The plausible argument for the change is that the benefit to these workers is large enough to outweigh the effects on the newly unemployed. But even that claim is tenuous. A study by economists Joseph Sabia of American University and Richard Burkhauser of Cornell found that "minimum wage increases between 2003 and 2007 had no effect on state poverty rates."

In the picture painted by Obama and congressional Democrats, raising the minimum wage is an unmixed blessing, helping some people while harming no one. If you believe that, the next Bernie Madoff is out there, and with any luck he'll find you.


Steve Chapman

Steve Chapman is a columnist and editorial writer for the Chicago Tribune.
 

 
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