Almost daily on the news we hear local, state and federal politicians screaming to raise the minimum wage. Unions wanting to increase their membership ranks are fueling most of this fervor. The fight for $15 per hour is center stage among several vigorous union organizing efforts, including fast-food workers who have been traditionally difficult to organize due to high turnover rates. But is this campaign in the best interest of workers’ long-term health and increased wages?
Two important facts that most politicians and labor leaders have lost sight of are: a) history proves that government is extremely inefficient in creating jobs and raising wages and b) workers are not entitled to anything from employers. Instead, the main goal of any business in the private sector is to make money. They have no obligation to hire anyone or pay any specific wage. However, as I wrote previously “Key To More Jobs: Fuel Entrepreneurs!” research from the Small Business Administration proves that 70% of the net new jobs in the U.S. over the past 30 years (prior to the recent recession) were created by small businesses! Therefore, when entrepreneurs increasingly start and grow new companies, they significantly increase jobs creation and wages!
Additionally, many R&D recruiters, scientific recruiters, engineering recruiters, technical recruiters, IT recruiters and manufacturing recruiters we polled, that are part of our executive recruitment network, shared that employers naturally and gladly (without any government intervention) will pay higher wages when skilled employees are in short supply and high demand in the marketplace. They do so not out of the goodness of their hearts, but because it is in their best economic interests to grow their businesses and make money. Therefore, all these misguided efforts towards mandating a minimum wage should be refocused towards creating a healthy environment for entrepreneurs to flourish. When successful, they will naturally hire many new workers and gladly pay higher wages.
Mistakenly, many major city mayors from Los Angeles to New York are fixated on boosting sluggish wages with legislative measures. Fourteen states raised their wage floors in 2014. Many of these cities were encouraged by the Obama administration’s very pro-union stance. Furthermore, as I wrote previously at “Mr. President: NLRB Policies Are Killing Jobs!“ the current National Labor Relations Board is one of the most antagonistic towards business of all time! These foolish efforts are squeezing the lifeblood out of entrepreneurship and new business creation. For example, the percentage of Americans under 30 years old who were willing to risk becoming an entrepreneur recently hit a 24-year low! According to the latest figures from the Federal Reserve, only 3.6% of households headed by adults younger than 30 owned stakes in private companies. This compares with 6.1% back in 2010 and 10.6% in 1989, when the central bank began collecting this vital information.
There are many reasons for this decline including limited access to capital, lack of skilled workers and increased taxes and regulations. Anyone of these areas could be the focus of government to help entrepreneurs and in turn raise wages. For example, the government should improve STEM education. As I wrote in “Exercise Our Nation’s Students Into More Engineering, Scientific and Technical Graduate Studies and Jobs“ our science, technology, engineering and math instruction is sorely lacking. Many companies have to spend a lot of their own money to create training programs to make up for significant skill gaps.
Another area the government can help is significantly reducing tax and legislative burdens on small business owners. Growing taxes and regulations only increase the risk to young entrepreneurs, which makes them think twice about wanting to start a business.
In summary, the real way to create a lot more jobs with significantly higher wages is not through mandating higher minimum wages. Instead, government needs to provide a lot more incentives for the historically proven creators of new jobs and higher wages, entrepreneurs!
What are your thoughts?