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Explore new avenues to higher wages

Published February 06. 2014 4:00AM

Democrats across the governmental spectrum are taking up the cry, "$10.10!" With President Obama leading the way in last week's State of the Union address, party faithful have rallied to increase the minimum wage to that number.

In his speech, President Obama announced an executive order raising the minimum wage to $10.10 per hour for federal contract workers. He also endorsed a bill introduced by Democrats Sen. Tom Harkin of Iowa and Rep. George Miller of California that would raise the minimum to that $10.10 level and tie it to the inflation rate.

"This will help families. It will give businesses customers with more money to spend. It doesn't involve any new bureaucratic program," said the president in asking for congressional support.

Here in southeastern Connecticut, New London Mayor Daryl Justin Finizio, who says he is proud to call himself a progressive, quickly climbed aboard and proposed an ordinance that would raise the city's minimum wage for municipal employees and contractors to $10.10, much to the delight of high school and college students who earn a few extra bucks working as lifeguards in the summer.

On Tuesday, Gov. Dannel P. Malloy called for gradually increasing Connecticut's minimum wage to $10.10 over a three-year period. The state's minimum wage law, already among the highest in the nation, is $8.70 and would increase to $9.15 in 2015, $9.60 in 2016 and to $10.10 on Jan. 1, 2017.

There is both the practical and political involved in this big push by Democrats to mandate a boost in pay for those on the lower end of the wage spectrum. The minimum wage has not kept up with the cost of living. It is close to impossible for families to get by on the salary that current minimum-wage laws provide. Workers at these low wage levels need public assistance in the form of food stamps and Medicaid to get by. There is an argument to be made, certainly, that government is effectively subsidizing the ability of large employers, such as Wal-Mart, to profit by providing such low wages.

Polls show the idea of raising minimum pay is politically popular. Democrats facing the 2014 congressional elections are eager to change the subject from Obamacare and the slow economic recovery. Mandating a pay hike is a concept simply understood. As the president put it, "Say yes. Give America a raise."

It is not so simple in practice, however. Economist Milton Friedman is among those who argue that a big spike in the minimum wage could hurt the very people who are struggling the most in the current economy - low-skilled workers and the long-term unemployed. Forced to pay higher wages, Mr. Friedman argues, businesses will demand higher skilled workers for positions and hire fewer. Teens seeking entry level jobs and minorities will be particularly hurt, he argues.

"The most anti-black law on the books of this land is the minimum wage law," he contends.

We would not go that far. Minimum wage laws have provided a necessary floor on wages since their introduction during the Great Depression. The current federal level is too low. But the size of the increase being proposed by Democrats is so steep it could do more harm than good, discouraging hiring and burdening small businesses operating on the margins.

We would suggest exploring new, creative approaches to the issue. Instead of mandating higher wages, why not provide businesses incentives to provide them? Offer tax breaks tied to a living wage - say $15 per hour - to offset the increased business costs. This should produce commensurate savings to taxpayers as workers provided this higher wage do not need social service programs to get by.

Combined with incentives of hiring the long-term unemployed, such an approach could generate job growth, rather than discourage it, and reduce the worker turnover often tied to low-wage jobs.

It is time for some innovation in the halls of government, rather than refighting the same age-old battles.

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