The Business Case for a Higher Minimum Wage

Proposals to raise the minimum wage are enormously popular with the American public, but there’s a reason they are successful only on occasion.

The powerful business lobby is quite effective at getting through to lawmakers with their message that higher wage requirements will lead to less employment. That’s a particularly potent argument in today’s environment, after four years of elevated unemployment levels.

So you can expect a major fight over the proposal introduced last week by Sen. Tom Harkin and Rep. George Miller. It’s an aggressive approach that would hike the federal minimum wage to $10.10 over a two-year period, and then tie it to the consumer price index so it keeps up with inflation. They would also increase the minimum hourly wage for tipped employees, which has been set at $2.13 an hour since the days when combat in Iraq was directed by President Bush – that is, the first President Bush.

A bill like this will find a tough road ahead without attracting support from the business community, and there is movement afoot to attract executives who are willing to swim against the current on this issue.

Craig Jelinek, president and CEO of the retail giant Costco, has emerged as the most prominent advocate of the Harkin-Miller bill. Jelinek’s company is known for its relatively generous pay scale, with employees starting out at $11.50 per hour or higher.

The higher pay is worth it to the company because employees are motivated to work harder and stick with the company, Jelinek says. Now he is arguing that all businesses would see a similar benefit from a national minimum wage increase. “Instead of minimizing wages, we know it’s a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty,” he says.

Jon Cooper, president of ultraviolet technology manufacturer Spectronics Corporation, puts his support for a higher minimum wage in moral terms – a family just can’t survive on a minimum-wage job, he said in an appearance on Fox Business News. Putting more money in the hands of low-income families is also a good strategy for the economy, he argued:

Eight-eight percent of people that get minimum wage are not teenagers. They’re actually adults. And I think that if we can pay these folks something closer to a living wage, that money isn’t going to stay in their pockets. If they get an extra $100 a week, let’s say, they’re going to spend that locally buying food for their families, clothing, school supplies for their kids. It’s going to go to local business, small business, it’s going to boost the economy and grow jobs.

As debate over the minimum wage heats up, expect to hear more from business executives like this. Harkin, Miller, and their allies will need them.