Up With Labor Laws, Down With Employment

President Obama’s “Fighting to Stay Relevant” tour continues this week with a pledge to raise the minimum wage to $9 an hour. Given the current headlines of fast-food workers on strike and Wal-mart waging war with the DC government, the minimum wage conversation is particularly relevant. But while the President’s heart is in the right place, raising the minimum wage at this point would risk cutting the legs out from under an already-sluggish economic recovery.

It’s difficult to build a life off the minimum wage, yes, but minimum wage jobs should not be, and are not, permanent sources of income. CNN reports that only 4.7% of workers paid by the hour make minimum wage. Positions that earn such wages are by design meant to be entry-level, made for people with low skills. Moreover, the ability to hire workers at low wages is an important asset for any firm looking to expand into uncertain territory. It’s this expansion that will fuel our economic recovery.

Take Wal-mart, for instance. The retail giant is currently looking to open several stores in my hometown of Washington, DC. Many would open in some of DC’s poorest areas, bringing jobs and affordable goods to places where unemployment reaches upwards of 20%. But the union-backed DC City Council passed legislation that would effectively require Wal-mart to pay wages of $12.50 an hour, forcing the company to scrap plans for three stores.

Opening stores in poor DC neighborhoods is a risk for Wal-mart, so it must keep its initial costs low by paying minimum wage. If the stores prove successful, though, they will demand the best workers by offering higher wages on their own terms. The average Wal-mart worker in America earns $12.78 an hour – a level the DC stores could approach if the City Council would let the markets work.

President Obama ought to recognize the virtue of patience – give businesses time and freedom to grow, and they will produce jobs with robust, competitive wages. Meddling with the labor markets in a fragile economy is rash, and raising the minimum wage will just make life that much more difficult for the 12 million Americans still looking for a job.


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