Opinion: Editorial

Let it be

Last Thursday, state Senate Majority Leader Russ Decker, D-Weston, threw his own proposal in the ring in the wake of a new Democratic trifecta in state government. Facing a $5 billion deficit, a national financial crisis and the need for immediate economic relief for Wisconsin residents, Decker put forth the best proposal he could think of — an increase in the state’s minimum wage from $6.50 to $7.60.

It should be noted, of course, that this would only be an increase of 35 cents by next July, when the federal minimum wage shoots up to $7.25 an hour.

While we think it is admirable that Decker is looking for ways to help the working class of Wisconsin in a time of economic uncertainty, the effectiveness of the minimum wage is, itself, an uncertainty.

The common argument claims a higher minimum wage places an additional burden on businesses, which results in companies laying off workers to balance the new wage increases. As it would seem, the laws of supply and demand seem to dictate this would be the case — especially with small businesses. Even a 35-cent increase for an employer with seven workers would cost an extra $5,000 a year — which, with decreasing revenue for most companies, might be enough to drag many small businesses under.

However, the laws of economics often don’t follow their theoretical path. Several studies conducted on the effectiveness of the minimum wage have shown the detrimental effects on businesses are often minimal or non-existent. Also, those in support of the minimum wage would argue the demand for workers is inelastic, and prices will simply increase in order to compensate for maintaining current employment levels or hiring new workers.

Both these arguments might be plausible in a normal economy, but we’re in no such situation. Given this economic epidemic has spread to infect the coffers of financial markets, state government, the auto industry and the average taxpayer’s wallet, the outbreak does not show signs of slowing.

Whether or not the minimum wage will help or hurt Wisconsin families in the long run, it is not a crucial measure to fix the shattered Wisconsin economy. With the federal minimum wage already rising to $7.25, there seems to be no reason to throw another variable into the grand experiment of government intervention while the total damage of the financial crisis is unknown. When credit levels out and we seem to have hit our foregone nadir, then this measure can be reconsidered.