I would like to thank Alyson Clements of the WV Center on Budget and Policy for setting the record straight in her April 30th letter to the editor. The legislation passed by the West Virginia legislature raises the state minimum wage to $8.75, not $10.10. It is the proposed federal legislation that would raise the national minimum wage to $10.10 per hour if passed.

That said, the recently passed state legislation goes beyond current federal minimum wage law in very important ways and the wage portion isn’t even the most concerning. Federal Law contains exemptions that are currently relied upon by small business, hospitals and municipalities in West Virginia. The new state law would nullify those exemptions.

Almost everyone, including myself, wants to see everyone, especially those at the bottom of the pay scale, do better. Doing so by government decree may not be the most effective way to go about it. To those that claim that raising the minimum wage will create a boom in the West Virginia economy I ask the obvious question: The minimum wage has been raised in West Virginia before - has that ever caused an economic boom?

In Australia, the minimum wage is over 16 dollars per hour. However, if you go to a Subway in Sydney and order what we here in the US would call a “five dollar foot long”, it will cost you 11 Aussie dollar (the equivalent of approximately $10.25 in US dollars). Prices adjust. Market forces cannot be legislated away without consequences - unintended or otherwise. Unless you want a completely planned economy where the government dictates wages and prices, you’re spinning your wheels. And we all know how well those planned economies perform. Check out Cuba and Venezuela.

Here in West Virginia, in addition to minimum wage, we have something called “prevailing wage”. State government contractors must pay their employees a prevailing wage, fixed by the state, for work done for the state of West Virginia. This obviously severely limits the ability of contractors to bid competitively. If there isn’t much wiggle room to differentiate on price that leaves the door open to other differentiators, such as cronyism.

There is much debate as to whether or not prevailing wage is really that. Why not let the free market calculate the price? Even many supporters of prevailing wage acknowledge that it needs to be “recalculated”, meaning that prevailing wage costs taxpayers plenty. As Delegate John Overington of Berkeley County has said on numerous occasions, because of prevailing wage, when West Virginia taxpayers pay for 10 miles of road, they are only getting 7. Some estimates put the cost to taxpayers at $300 million a year.

I remember a meeting in Charleston concerning prevailing wage that included members of the legislature, officials from the West Virginia Department of Labor and representatives of then Governor Manchin’s office. One commented that West Virginia perennially ranks at or near the bottom in per capita income and that prevailing wage is designed to help mitigate that. The problem with that argument is that prevailing wage was implemented in West Virginia in 1937. In 1934 West Virginia ranked 30th in per capita income - not near the top, but considerably closer to the middle than the bottom. We now rock back and forth between 49th and 50th - near or at the bottom. Clearly prevailing wage is not working as intended.

No matter how well intentioned, government interventions in the market rarely if ever work. So, how do we achieve our goal to raise worker pay, especially those at or near the bottom? First we need to understand where jobs come from - where they are created. Businesses and only businesses create jobs (no, the government does not create jobs - but that’s a subject for another day) and small business, especially startups, are the engine of economic growth and job creation in America. If the economic climate is healthy, entrepreneurs start businesses and hire workers. As economic activity increases, the demand for labor creates competition for workers leading to higher wages. When you artificially legislate the increase in wages you decrease demand. Even Warren Buffet acknowledges that minimum wage laws increase unemployment.

A recent Washington Post article reported that a Brookings Institute study shows that for the first time in decades businesses are being destroyed faster than they are being created. The study covers the years 1978 through 2011. Only the last three years in the study 2009 - 2011 showed more businesses dying than being created. (Coincidentally, recent government data show that the workforce participation rate in America currently is back to 1978 levels.) The Brookings study also showed that teen employment has dropped by a shocking 42% since 2000. While every state showed a negative differential in the percentage of new businesses to established businesses, West Virginia ranked in the bottom fifth of all states in that regard. In other words, In America, we’re losing businesses faster than we’re creating them, and in West Virginia faster still.

We all want a vibrant economy where businesses flourish, jobs are plentiful and employers have to compete for workers. How do we achieve this? Here’s a hint. You can ask existing business owners, but in some cases it just might be that the status quo works for them, particularly the really big guys. Regulations and bureaucratic red tape have a tendency to act as barriers to entry for many entrepreneurs. Existing businesses may in some cases consider regulation to be a protection against upstart competition.

Instead, go ask an entrepreneur, if you can find one. The Washington Post article suggests that America may be losing its entrepreneurial spirit. With all the hurdles and obstacles they face, many entrepreneurs have come to the conclusion that going into business for oneself isn’t worth the risk. A shortage of entrepreneurs leads to a shortage of jobs and a shortage of economic opportunity. For all the people out there that need a job or better pay - that’s a shame.