Slapping The Invisible Hand

Chuck Collins is a senior scholar at the Institute for Policy Studies. He is co-author of the forthcoming book, The Moral Measure of the Economy . He can be reached at  chuck@ips-dc.org [1].

The Senate is scheduled to vote as early as Tuesday to raise the minimum wage for the first time since 1997.

The usual array of “Chicken Littles” have claimed a hike in the wage floor will be bad for business and hurt low wage-workers. Earlier this month, columnist George Will suggested that the “minimum wage should be the same everywhere: $0. Labor is a commodity.”

So it’s surprising and refreshing when you meet small business owners and CEOs who believe the opposite: that competing on the basis of who pays less is a dead end.

“People who tell you that raising the minimum wage will hurt small business are flat out full of it,” said Lew Prince, co-owner of Vintage Vinyl, a music retail business in St. Louis. “Small business owners know that keeping workers is easier and cheaper than finding and training new ones.”

Prince and a growing number of small business owners argue that paying a decent wage lowers employee turnover, improves morale and is the right thing to do. “Our long-term employees are way more likely to establish ongoing relationships with customers,” said Prince.

Prince has joined several hundred business owners in signing a public petition [2] of business owners and leaders who support a hike in the federal minimum wage. The effort is coordinated by the interfaith coalition Let Justice Roll [3] and a network currently in formation called Business for Shared Prosperity.

Some of the well-known signers include Jim Sinegal, CEO of Costco; Eileen Fisher, CEO of apparel giant named after her; Margot Dorfman, CEO of the U.S. Women’s Chamber of Commerce, and Bill Foster, the cofounder of Electronic Theater Controls.

For many business owners, paying their workers well is common sense. "Trying to save money by shortchanging my employees would be like skimping on ingredients,” said Kirsten Poole, a petition signer and co-owner of Kirsten's Cafe and Dish Caterers in Silver Spring, Md. “I'd lose more than I saved because of declining quality, service, reputation and customer base. You can't build a healthy business or a healthy economy on a miserly minimum wage."

A growing body of evidence shows that successful businesses that are “built to last” don’t skimp on wages. "It is a sound business decision to increase the minimum wage,” said venture capitalist Adnan Durrani, president of Condor Ventures in Stamford, Conn. “I have found that without exception in the successful ventures we've backed, providing sustainable living wages yielded direct increases in productivity, job satisfaction and brand loyalty from customers, all contributing to higher returns for investors and employers."

Research by the Economic Policy Institute [4] validates the theory that raising the minimum wage will have a positive effect for low-wage workers without a negative effect on the economy.

The measure will eventually pass the Senate. The only question is how much corporate lard will be added to slide it through the Senate and across the President’s desk. Small-business owners know that most of these tax breaks aren’t for them. “They’re trying to add a bunch of pork and so-called tax breaks for the big businesses that are trying to gobble up our customers,” observed Lew Prince. 

On Friday, Republicans in the Senate continued to offer amendments to the minimum wage bill, leading Sen. Edward Kennedy, D-Mass., to finally blow his stack. "When does the greed stop?" he asked on the floor of the Senate, pointing to over 70 amendments costing over $200 billion. “How much more do we have to give to the private sector and to business? How many billion dollars more, are you asking, are you requiring?”

Senate Democrats should keep pushing for a minimum wage bill unencumbered by billions in tax breaks. Let’s cleanly raise the minimum wage and get on with the people’s business.