Article originally posted to the Louisville Business First web site http://www.bizjournals.com/louisville/print-edition/2014/11/21/minimum-wage-hike-let-s-think-this-through.html?page=all
Minimum wage hike — let’s think this through
Luke B. Schmidt
As the president of a small management-consulting firm, I have followed with interest recent discussion in the community about raising the minimum wage.
To begin with, I think that it is fair to say that each of us as employers, employees or consumers want to see that workers are fairly compensated. It goes back to the old saying: “an honest day’s pay for an honest day’s work.”
But recent interest on the part of some Louisville Metro Council members in raising the minimum wage in Louisville raises several red flags. It would be easy for the council to pass minimum wage legislation, but there would be several ramifications, including:
Is it really government’s place to dictate to business what workers should be paid? The answer is NO.
Our country operates on the free enterprise system, meaning that government should stay out of the way when it comes to everyday operating issues. Government’s role is to ensure a safe workplace and a competitive marketplace.
Raising the minimum wage would only make Louisville even less competitive with surrounding counties — in both states.
Louisville Metro would transform into an island unto itself and would become a less competitive marketplace when compared to surrounding counties. Retail prices would go up in Jefferson County and could surpass retail prices in surrounding counties, thereby putting local merchants at a real competitive disadvantage.
Raising the minimum wage would result in businesses passing along this added cost to customers. This would affect my consulting firm and every business in Jefferson County.
It most likely would result in some of my company’s local purchases for goods and services being diverted to merchants outside Jefferson County or to the Internet.
The purpose of the minimum wage is to serve as an entry-level wage or a part-time wage, not a full-time wage. The goal should be to get full-time workers up and beyond the minimum wage as quickly as possible.
Focusing on raising the local minimum wage misses the point entirely.
The focus should be on what can be done to improve the climate for creating new jobs — not only in Jefferson County but all of Kentucky.
Here are three things that government can do to create really good jobs going forward:
1. Pass right to work legislation. Kentucky is the only state in the Southeast and one of several in the Midwest that does not have this legislation, which has proven to be a magnet for big-time industrial development. (Read: new high-paying jobs.)
2. Pass meaningful tax reform. The change needs to be more than just a line in the tax code here and a line in the tax code there. Comprehensive, overall reform is required. Kentucky needs a competitive tax system that generates meaningful revenue to fund appropriate government programs/services but doesn’t send potential new business/industrial investment to Tennessee.
3. Pass LIFT, or local-option sales tax, legislation. This would give local voters a say in funding special projects in all 120 counties — projects that would create lots of new construction jobs.
In many respects, Kentucky is no longer (and hasn’t been for quite a while) competitive with most of our surrounding states. Look at the rate of growth, jobs, population, etc., in Kentucky and then compare it with Georgia, North Carolina, South Carolina and Tennessee.
Rather than focus on a small piece of the puzzle, let’s focus on big steps that will create thousands of new, high-paying jobs in Kentucky — and Jefferson County. It’s time for bold leadership!
Luke B. Schmidt is president of L.B. Schmidt & Associates LLC, a Louisville-based full service international management consulting firm.