Last month, the Urban County Council's Budget, Finance and Economic Development Committee put on hold until June the debate on whether to raise the minimum wage in Fayette County to $10.10 over the next three years.
In a recent op-ed Jesus Gonzalez, one of 19 people unable to speak at the meeting, claimed that "Raising the minimum wage isn't about the economy; it's about people."
I'm here to tell you why it's all about the economy.
Of those who were able to speak at the meeting the battle lines were clearly drawn.
On one side low-wage workers and advocates pointed at the inability of families to make ends meet due to the decline of the minimum wage over the past few decades (adjusted for inflation).
On the other side, business owners claimed an increase would hurt their bottom lines and erode their businesses.
The polarity of this debate is misleading though, creating a false dichotomy. The reality is much more counterintuitive: Raising the wage helps workers and business owners.
But how? From the perspective of a small-business owner, it's basic economic sense that raising their employees' wages will either lead to decreased profits, necessitating reduction in staff or increased costs for consumers in order to compensate. Bad on both ends.
At the micro-economic level this is financially true; if one business raised the wages of its employees these would be the only outcomes. But raising the minimum wage is a macro-economic shift affecting all businesses and all minimum-wage workers.
Thus, in order to understand its full impact on the local economy, we have to examine it from a macro perspective.
A recent report by the non-partisan Kentucky Center for Economic Policy found that a minimum-wage increase to $10.10 in Fayette County would directly benefit 20 percent of its working population.
Over 31,000 employees on minimum wage in total; 16,900 working full-time and 14,500 working part-time.
The center defines full-time as working at least 35 hours per week. For arguments sake, let's say these employees all work the bare minimum of 35 hours.
If these 16,900 employees earned $10.10 per hour, $2.85 more than current levels, they would collectively have an additional $87,660,300 per year in income. Factoring in the 14,500 part-time employees working — conservatively guessing, an average of 15 hours per week — the grand total of additional income rings in at just shy of $120 million per year.
The basic forces of the free market, supply and demand, are predicated on the economic capacity of individuals to actually purchase goods and services. Without the economic capacity to make ends meet and have discretionary income, there is no demand and the market stagnates.
At the current minimum-wage levels, 20 percent of Lexington's workforce is barely scraping by, much less spending money on luxuries like going out to eat or getting their car tuned up at the local mechanic.
In its report, the Kentucky Center for Economic Policy references a wide range of studies conducted by economists who all reach the same conclusion: Raising the minimum wage has been found to have little to no negative effect on employment levels.
This is due largely to the increased market efficiency caused by lower turnover in minimum-wage employees. Once people are earning enough to get by on, they stay in their jobs longer, resulting in lower costs of training new employees, and higher productivity.
That alone makes raising the wage economically viable for the overall market in the county, but it gets better for business. It means the local economy has an additional 31,300 potential customers with $120 million annually in greater purchasing power they will spend mostly at Lexington businesses.
The micro-economic cost to individual businesses of raising the minimum wage of their employees is offset by increased efficiency, increased productivity, lower turnover rates and the macro-economic impact of a lot more people now able to purchase their products.
That all adds up to a stronger and more vibrant business environment. It's basic economics backed up by extensive research. Doing what's good for business is the same thing as doing what's good for workers. Raising the minimum-wage bears fruit for all.