Minimum Wage - Hurting Those It Is Supposed to Help

South Dakotans face a minimum wage question when they go to the ballot box in November. The measure, if passed, would raise the state minimum wage from $7.25 per hour to $8.50 per hour. Perhaps Initiated Measure 18's most significant change, however, would be to require inflationary increases each year based on the Consumer Price Index.

While I do not agree at all with the increase in minimum wage, I think the most dangerous aspect of the measure is to tie an ongoing, annual increase in wages to a national inflationary gauge that reflects economic conditions in California or New York rather than South Dakota.

This idea may sound like a good idea in a growing economy when times are flourishing, but think back to the economic meltdown of 2008-09. Would it have made sense for employers to be forced to give raises to workers in a time when they were struggling to keep their doors open? Mandatory pay raises FOREVER! If it sounds too good to be true, it probably is. Where do businesses sign up for ongoing, increased annual revenues to be able to pay these perpetual raises?

So if raising the state's minimum wage is really a good idea, why do we stop at $8.50 per hour? Supporters suggest that workers would receive more than $46 million in new wages, providing a economic stimulus across the state.

If that is true, think of the economic impact an increase to $50 per hour would have. Why not go to $75 per hour; or even $100 per hour? Think of the new houses, cars, boats and appliances that would be sold. Retail businesses would go wild!

Why that is ridiculous you say. Why? Will $50 per hour have a negative effect on employment and on the economy? How do we know? Why would this wage be any different than $8.50 per hour?

What $8.50 really represents is the politicians best guess at what will make him look like he supports the "little guy" or "underdog". The politician can legislate a raise for the low end of the wage scale. He can buy votes.

Meanwhile, the "little guy" takes the potential raise at face value. He does not consider that he may lose his job. If he is not providing $8.50 per hour of value, his employer may choose to eliminate his job. And if that happens, will he blame his employer or the politician that advocated for a raise in minimum wage?

Business owners will have to raise prices to pay for these raises. The "little guy's" raise does not buy as much as it did. So we must raise the minimum wage again. And so the vicious circle continues.

In Los Angeles, the city council recently passed a $15.37 minimum-wage law for large hotels. However, the law contains a provision that allows unions to waive the requirement in collective bargaining. So if you're a hotel, you have a choice: pay an uneconomic wage necessitating increase in prices to compensate or partner with the union to force your employees into a collective bargaining agreement that will see them earn less and force them to pay union dues (which will end up in the coffers of Democrat politicians).

We have a very good, nearby example of how wages can be increased in a much more efficient way. If we look to our neighbors to the north, we see a perfect laboratory for how to really increase wages.

We hear stories about signing bonuses and $13 per hour starting wages in fast food restaurants in western North Dakota. This is simply a response to the demand for workers being greater than supply. More job opportunities will raise wages every time. Employers are forced to compete for workers and the best way to compete is to offer a better wage or better benefits.

Perhaps we should consider asking small businesses what we can do to help them grow their businesses and create a greater demand for workers. Most of the small business owners I know would say that one of the greatest drags on their business is government regulation.

It is a great risk and a lot of work to start and run a business. If one takes on that endeavor, they should have the right to hire whomever they please and at a wage they can afford. They should be able to give raises to employees who really deserve them. Let us allow the market to dictate whether or not that happens.

I can tell you that I haven't paid minimum wage to an employee for longer than three months for 20+ years. Those minimum wage workers were all summer help who were allowed time off for all there baseball games during the summer (that was a significant number of games!). They were paid minimum wage but they had a very accommodating job!

I hope the voters of this great state make a logical rather than emotional decision in November. Don't throw a wet blanket over the economic engine of CNBC's Top State for Business for 2013.

VOTE NO ON SOUTH DAKOTA INITIATED MEASURE 18!