Zitti: A forced minimum wage increase is risky business

Author: Rudy Zitti - October 15, 2016 - Updated: October 15, 2016

Rudy Zitti
Rudy Zitti

When outside sources insert their agenda into other people’s business the results are often devastating. Among issues to be voted on this Nov. 8 is a minimum wage increase that will put the fate of many business owners and low-skilled job seekers in jeopardy.

Put yourself in the shoes of a business owner. Your employees and the value they can bring to your business has a direct relationship to the salary you can pay them and still stay in business, make a profit, expand and hire more employees. These decisions and calculations are made every day by owners and managers regardless of the size of the business.

In order to succeed, the owner must make the most efficient use of resources. The decision of pay should be left up to the person who has the experience and firsthand knowledge of overhead and operating expenses.

There are many factors that go into the equation, such as new regulations, fluctuating cost of materials, transportation, fuel etc. The entrepreneur alone bears the risk for balancing these elements and must have their hand on the levers of internal control — such as setting pay rates — to effectively grow their business.

If Amendment 70 passes it is tantamount to meddling in someone else’s business.

The argument that increased minimum wages will improve the economy by increased spending does not make sense. Initially a minimum wage may give a short-term boost to the low wage earner, but in the long term they will wind up right back where they were because that money is not created, but diverted from elsewhere in the form of higher prices and lower incomes.

Forced wage increases and subsequent increased cost for goods and services has unintended consequences for the low wage earner. A study commissioned by the Common Sense Policy Roundtable found that once the $$12 an hour wage reaches its mandatory level in 2022, Colorado will lose 90,000 jobs. Teen employment will be reduced by 10,500 jobs, wage and salary incomes by as much as $3.9 billion a year.

Reduced unemployment would result from some workers losing their jobs and some workers being unable to find a job. This would be further exacerbated by business closures and consolidation, with some workers discouraged by reduced employment opportunities exiting the labor force entirely.

While some employees may benefit from higher minimum wage, those benefits would be offset by lost wages from reductions in employment and increased underemployment affecting young and low-skilled workers the most. Amendment 70 will not help the poor, it will remove job opportunities for low-skilled workers and it will result in the closure of many small businesses. Vote ‘no’ on Amendment 70.

Rudy Zitti

Rudy Zitti is the deputy Colorado state director for the Americans for Prosperity Foundation.