Over the past year, the Democratic Party has again insisted that minimum wage must be raised to keep up with current inflation and the cost of living. Citing that minimum wages have not been increased since 2009, many of the supporters calling for the increase in minimum wage claim that such a hike in the minimum wage would allow workers to help themselves out of poverty and reduce the dependence on federal and state welfare support programs. Unfortunately, raising the minimum wage will not end poverty, reduce dependence on welfare programs or even allow for economic mobility of the nation’s working poor. In fact, raising the minimum wage will actually have the opposite effect.
There are fundamental untruths that the American Left, the so-called Progressives, have sold to the American worker since 1877 is that it is possible to become a part of the upper middle class working a 40 hour work week. Labor unions, working in step with the American Left have given rise to the idea that the worker should have a greater share of the corporate profits, a “living wage” normally defined as middle class, and a host of other benefits. A few years back, a young student in one of my U.S. history courses actually proposed the idea that the purpose of corporations should never be about the maximization of profit, but about providing of benefits and “decent wages” to its workers. As I began to question her about her view on the purpose of corporations, she continued to point to the money made by CEOs, the amount of gross revenues, and other misunderstood or misrepresented facts to support her opinion. I came to the realization that the current generation of Americans between the ages of 18 and 30 have no real understanding of economics.
Within the last ten days, while at a campaign stop, former Secretary of State and Democratic Presidential hopeful Hillary Clinton told an eager audience that businesses and corporations do not create jobs. She said this, trying to raise political support from those within the party that support Senator and Democratic Presidential hopeful Elizabeth Warren, who claimed back in 2012 that the successful small business owner “didn’t build” their own success. In her statement, she claims that the successful entrepreneur did build their own success, but that others contributed to their success. With venom in her voice, she flames the fires of class warfare while presenting classical Marxist theories that the business owner, with no distinction between large corporations or the small self-proprietor, is robbing the employees of fair wages by not sharing in the profits of business.
In reality, she and Mrs. Clinton seem to have forgotten that the small business owner, the successful entrepreneur, and larger corporations also pay taxes to support the infrastructure, emergency services, and the cost of local and state government. In my own experience as a small business owner, I am required by law to collect sales taxes and send them to the state annually, I pay tangible property taxes on the equipment used, I pay sales taxes when I purchase new equipment, and within Kentucky, I pay a value tax on property leased by the company I own, and there are annual licensing fees that are paid to the local county – all to own and operate a small business. Right now, I do not have any employees, but as the company begins to grow, I will be required to pay into the state’s unemployment insurance program and various local, state, and national taxes and withholdings. The larger the company grows, the larger the financial burdens and obligations to various levels of government grows.
What Ms. Warren and Mrs. Clinton both fail to acknowledge is that corporate profit is the financial reward for corporate risk. For any business to become profitable, the business owner must accept risk. Every product sold or service provided has an inherent risk factor. Simply defined as used in this context, risk can be defined as the investment of capital into a product. Sometimes, that risk pays off and results in an increase in income – or gross revenue – for the company; then there are other times the risk does not pay off and the results are fiscally tight times. While the socialists and unionists demand a greater share of the corporate profit, in reality, the average American worker is fairly insulated from risk. While there is always the potential for a company to fail and the employee to lose their job in the most extreme cases, the employee must be paid wages for work already completed, regardless of the success of the line of product or the service rendered. The greatest risk any corporation takes is carried by its owners and investors; therefore the greatest share of the rewards of that risk rightfully should go to those who bore the greatest risk.
If those who claim, as do Ms. Clinton and Ms. Warren, that they want what is in the best interests of the American worker and middle class truly mean it, then they must quit attacking the American businessman and businesswoman, and demand a more supportive environment for real economic growth from our state and national political leaders.