Higher wages do help businesses

I stand opposed to the position of the Employment Policies Institute as stated in its Fence Post Letter of Jan. 18.

First, there is plenty of evidence that raising the minimum wage has no detrimental affect on unemployment levels. The Fiscal Policy Institute took such a position in 2004 upon the increase of New York state's minimum wage. Their letter references other studies showing employment increases when the minimum wage is increased.

Secondly, without a minimum wage, the market would drive wages lower. It is a matter of survival for any business. When one company pays its workers less, others, in order to compete, must also reduce wages of their employees. We have seen the competitive forces reduce workers' wages in the airline industry. In order to survive, the airlines had to match the lower wages of their competitors. Neither airlines nor their employees benefited from the wage reduction, and employment in the industry did not increase.

It is rising incomes that bring about prosperity for businesses and workers alike. With higher wages, consumers increase their purchasing power and drive aggregate demand in the economy higher. Businesses, in turn, hire more workers to meet the increase in demand. Falling wages have the opposite affect by decreasing demand for goods and services.

The government plays the role of referee in the marketplace, by placing a floor on wages. The government sets a level playing field and prevents the ruinous competition from forcing employees to reduce wages, which reduces the workers ability to purchase goods and services. As a nation, we experienced this situation in the late 19th and early 20th centuries, when factory workers were paid so little that they could not buy the goods that they produced.

Tom Teune

Wheaton