Wednesday, February 05, 2014

Common Sense And The Minimum Wage

What a difference a campaign season makes. It was not so long ago – in March 2012 – that Governor Dannel Malloy was valiantly trying to tamp down efforts among General Assembly progressives to raise the minimum wage in Connecticut to $9.25 an hour from $8.25.

A story issued from Rick Green of the Hartford Courant: “Quassy Stands To Lose If Minimum Wage Rises: Even 50-Cent Hike Could Cost Over $150K, Owner Says.”

Mr. Green interviewed a minimum wage employer, George Frantzis of Quassy Amusement Park on Lake Quassapaug in Middlebury, Connecticut, who pointed out that the prospective boost in the minimum wage would force him to take measures. Mr. Frantiz told Mr. Green that a minimum wage increase would force Quassy to “cut back on recently approved plans to expand a water park. There would be fewer raises for returning employees,” not to mention business lost from the absence of a water park.

Low wage employers operate on a profit margin considerably less than, say, Cigna Insurance Company, which was festooned by Mr. Malloy with $47 million in tax benefits to improve the profit line of the multi-billion dollar company and re-anchor Cigna in Connecticut should the company be considering a move to, say, South Carolina, now home base for PTR, a Connecticut gun manufacturer that moved out of state to escape an atmosphere made frosty by Mr. Malloy’s politically self-serving comments.

In throwing a rhetorical brick at the National Rifle Association (NRA), Mr. Malloy and U.S. Senators Dick Blumenthal and Chris Murphy clipped the jaws of not a few gun manufacturers in Connecticut, still called “the provision state,” a moniker the state richly earned in the American Revolution, when it supplied the ragtag army of George Washington with war munitions. Referencing the slaughter at Sandy Hook, Mr. Malloy said that the much belabored NRA – and by extension gun manufacturers in his own state --  cared only about the Benjamins (see prior blogs and columns concerning smoke shops and the Donovan scandal). Connecticut gun manufacturers and their employees took the message and began looking for the exit signs.

In the Green interview, then Malloy Top Aide, Chief Cook And Bottle Washer Roy Occhiogrosso smartly summed up Mr. Malloy’s position on the minimum wage: “’There are only so many times you can say Connecticut is open for business,’ said Malloy strategist Roy Occhiogrosso, whose boss is faced with the challenge of convincing companies to move here. The governor ‘is not sure that raising the minimum wage is the right way to go. He is definitely concerned that increasing the minimum wage would send the wrong message.’”

Evidently, the WRONG message sent to both in-state and out-of-state businesses foolish enough to consider moving into Connecticut’s high tax and regulatory briar patch would be: We sure hope there’s a surfeit of tax revenue in your udders.

Mr. Malloy’s opposition to an increased minimum wage was not long-lived. That was then, as the fat lady preparing to step on stage to sing her doleful song might say – and this is now. Elections loom on the horizon; there are interests that must be satisfied, ideological bows to take.

A little common sense sprinkled on the minimum wage gambit yields this:

The real minimum wage is a salary set following a hiring arrangement satisfactory to the two principals involved in the salary negotiation – the employer, who sets a price of labor, and the employee, who does or does not accept a salary offer. The so called “minimum wage” that Mr. Malloy and the Democrat dominated Generally Assembly is pressing upon all businesses in Connecticut is a state mandated wage increase that affects only a few workers in Connecticut. In 2012, the median income for a family of two in Connecticut was $69,341.64. In order to provide this income, assuming both members of the family are working, both partners would have to be earning a “living wage” of $667 per week, which amounts to an hourly rate of $17.  Assuming progressives are successful in boosting the minimum wage to $10.10 by 2017, the person receiving the new minimum wage would fall short of a living wage by $7 per hour.  That’s the bad news. The worse news is that there will be fewer employees receiving the mandated minimum wage.  And the even worse news is that the jobs eliminated by employers paying the inflated labor costs will fall most heavily upon the working poor.

Cigna, the Connecticut company Mr. Malloy favored with tax dollars, one may be sure, pays its employees a salary above minimum wage. The Cigna salaries also are set as supply and demand arrangements between private parties. If you are a prospective employee and dislike the salary offer at Cigna, you can always try your luck at Aetna or some other insurance giant in what used to be called “the insurance capital of the world” – for the time being. In a universal health care system, large insurance companies will transform themselves into boutique operations servicing the sort of people whose income matches that of Senator Dick Blumenthal, the 6th richest U.S. Congressman, or U.S. Representatives Rosa DeLauro and Jim Himes, both millionaires who will be able to afford boutique health care, unlike minimum wage workers.

Asked by a Harford Courant reporter to account for his transformation from a tepid supporter of the minimum wage to a drum banging cheerleader, Mr. Malloy said, “The economy's getting better ... the American people are overwhelmingly supportive of it, other states are moving solidly in this direction and that's why I proposed a plan that phases it in. It doesn't do it overnight, but let me be very clear: I support a $10.10 minimum wage tomorrow and believe that the Congress of the United States should enact it ... but in the event that they're not going to do it, I think Connecticut should take reasonable steps to lead this discussion."

Mr. Malloy’s critics put the gaudy show down to election year politics. One Republican groused that when the minimum wage was raised by Congress 10.6 percent in 1990, nearly 600,000 teen jobs disappeared in the six months following the artificial boost in labor costs. But his voice will not shake the rafters, and all the politicians who favor the elimination of teen jobs in return for votes from a citizenry fooled most of the time by most of them will be in office when Johnny doesn’t land that missing summer job at Quassy Amusement Park.
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