Big Business Supports Minimum Wage Hikes

Lobbying intended to hurt mom-and-pop competitors

A new poll shows that a majority of Americans support raising the minimum wage. Doing so would almost surely help large businesses at the expense of smaller mom-and-pop stores and lower-skilled workers.

A few years ago, the conservative chief executive at Wal-Mart went public advocating for an increase in the minimum wage. A short time later, the “maverick” left-wing Costco CEO Jim Sinegal followed suit. Was it out of the goodness of their hearts? Maybe, but the more likely reason is that this would help their bottom-line.

While small businesses tend to be only marginally profitable and would have to spend a greater proportion of time and money dealing with this increase, larger corporations face no such predicament. Wal-Mart and Costco already pay significantly higher hourly wages than the current federal minimum — an average wage of $10-$13 an hour at Wal-Mart and $17 an hour at Costco as of a few years ago.

But minimum wage workers generally work for smaller, locally owned operations. These jobs tend to be temporary and help get low-skilled and first-time workers into the workforce. Many readers have undoubtedly started out with a similar experience. So while a higher mandated minimum would barely touch larger corporations, it would certainly hurt their small business competition.

Big business loves big government. In 2009, Philip Morris teamed up with the Obama administration and supported a bill that would allow the Food and Drug Administration to regulate tobacco in a way that hurts its competition. A few years ago, Coca-Cola announced a "world-wide commitment" to support putting energy information on all products — significantly hurting smaller bottlers while barely denting the huge conglomerate's bottom line. 

Nike and Apple advocate for a “carbon tax,” which would hammer their competitors while leaving the majority of their out-of-country operations unscathed. And H&R Block and Turbo Tax continue to lobby the Internal Revenue Service to crush smaller operations so they, in their own words, "won't be competing against people who aren't regulated and don't have the same standards as we do." 

These larger companies are able to more effectively lobby the government while smaller businesses bear the brunt of the legislation. And legislators, who offer unpaid internships that are not affected by minimum wage hikes, go along with it.

A small percentage of Americans actually make the legally allowed minimum, typically 2 percent to 5 percent of hourly workers, compared to nearly 15 percent in the late 1970s and early 1980s. These workers tend to be young, low-skilled and just starting out in the workforce. But as they gain skills and experience, workers move up and their compensation increases.

For these reasons and more, it should not be surprising that poll after poll shows that the vast majority of economists believe a minimum wage hurts unskilled workers while virtually every study finds that an increase in the minimum wage reduces employment.

As the late moderate/liberal economist Paul Samuelson wrote in 1970 about a proposed minimum-wage hike to $2 an hour: "What good does it do a black youth to know that an employer must pay him $2 an hour if the fact that he must be paid that amount is what keeps him from getting a job?"

In politics, there are a lot of issues that are popular, but not good policy. Minimum wage hikes is one of them.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.