Sure, Let's Deflate The Economy More

The usual suspects are beginning to complain about the minimum wage hike taking effect this month, giving Americans $7.25 an hour.

The impact of the higher minimum wage will resonate even beyond that group of earners and industries. Economists say there are 2.8 million workers earning between the current federal minimum wage of $6.55 an hour and the new minimum wage of $7.25 an hour, which takes effect on July 24 and has had no signs of delay from legislators. But some estimates figure an additional seven million workers are affected because their wages are tied to the minimum and will go up accordingly.

Ryan Arfmann, who owns a Jamba Juice franchise in Idaho Falls, Idaho, is a case in point. He said he will have to boost pay to all of his 18 workers. The ones making less than $7.25 an hour will be raised to the new rate. But he said he will have to give raises to those currently earning more than $7.25 an hour because they have more experience.

As a result, he plans to cut hours for his part-time workers. "I'll definitely have to run a tighter shift each day and watch numbers like never before," said Mr. Arfmann, who estimates his business is down between 3% and 4% this year.

Look, let's step back for a second. The real problem right now with wages is that they are deflating. People are being canned, and their jobs are either being eliminated or being replaced by cheaper contract workers or part-time workers. I'd argue that this is in fact the best time to raise the minimum wage when we're facing a double-deflation strike from falling home prices and tumbling wages. But the same tired arguments dragged out when the bill was signed into law in early 2007: we couldn't raise wages when times were good during the last decade because we were assured that the free market was paying people above that wage anyway, only to discover that millions of Americans were being paid $5.15 an hour because of global competition and the name of the almighty profit margin, and now we can't raise wages when people need them the most because it might hurt the economy.

In other words, we can never raise the minimum wage. Ever. Finally, under massive pressure, Congress and President Bush after ten years finally gave in after real wages fell to their lowest level since WW II. Now however, the cry is coming out that Congress should delay or even repeal the raise scheduled to take effect on July 24th.

Remember, the real problem is deflation. These geniuses want us to make sure we drive down wages even more.