This story on the effects of raising the minimum wage has two interesting aspects. First, it shows one of journalism’s biggest failings: a lack of understaning about business and economics. Second, it validates what Roy Cordato has been telling us all along: that raising the minimum wage hurts workers. But check out this statement by the reporter:
Some Valley employers, especially those in the food industry, say
payroll budgets have risen so much that they’re cutting hours,
instituting hiring freezes and laying off employees.
It’s not payroll “budgets” that increase with a rising minimum wage, it’s payroll “costs.” Budgets don’t rise on their own. Business owners must make a decision to increase a budgeted item to take care of an increasing cost of doing business. When costs rise, a business owner can increase his budget (i.e., spend more money) to make up for the increased costs, or he can keep his budget at its current level and cut costs (usually this means layoffs) to make sure his revenue can pay for his expenditures. If, as the reporter writes, payroll budgets have risen, there would be no need for cutting hours. It’s Economics 101 but, seemingly, too complex for today’s journalists.
