Wages and Taxes

Washington Post business columnist Steven Pearlstein was online Wednesday, Jan. 10 at 11 a.m. ET to discuss the minimum wage increse moving through Congress and the attempt to have small business tax breaks added to the legislation.

Read the column: Minimum Wage, Maximum Myth (Post, Jan. 10).

The transcript follows.

About Pearlstein: Steven Pearlstein writes about business and the economy for The Washington Post. His journalism career includes editing roles at The Post and Inc. magazine. He was founding publisher and editor of The Boston Observer, a monthly journal of liberal opinion. He got his start in journalism reporting for two New Hampshire newspapers -- the Concord Monitor and the Foster's Daily Democrat. Pearlstein has also worked as a television news reporter and a congressional staffer.

His column archive is online here.

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Dunn Loring, Va.: Your column today on the minimum wage, combined with David Finkel's story on Robert Iles is illuminating. However, there is one question that I wish Mr. Finkel would have asked the Iles family and if he's nearby, please holler across the newsroom and ask him if he knows. Do any of the Iles clan vote and if so for which party? Have they ever voted? It has long been holy writ--well, almost--that seniors get all the benefits when they retire because they do vote and the poor get nothing because they don't.

Steven Pearlstein: David isn't at his desk, unfortunately, so I can't ask. My guess is you are thinking they are Republicans who don't vote in their own economic interest. And if they are, they would be part of a very large chunk of the electorate. But here's the thing: the public is very supportive of a minimum wage increase. The Dems should just have an up or down vote (or a vote on cloture in the Senate, which is the same thing) and if Republicans want to vote against it, the Dems should let it sit for a few months, and run ads in the states where the Republicans voted against cutting off debate (that's cloture). Then take the vote again. I bet you would see more than a few Republican votes switch. And that would be important for setting the stage for other domestic legislation this session.

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Alexandria, Va.: Presidential candidate Jello Biafra has, as the main plank in his platform, the solution to this entire debate about executives making 800 times the pay of the average worker...institute a Maximum Wage law. The highest-paid employee of a company can make 10 times the wage of the lowest-paid employee, so if his incestuous cronies on the salary compensation committee want to pay Mr. CEO $10,000,000 a year, no problem...they just have to pay the janitor $1,000,000 a year. Now, THAT would get the attention of the plutocratic pigs that infest the boardrooms of America!

Steven Pearlstein: Not a good idea for government to set prices or wages. Ever. Sorry.

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Northern Virginia: Okay, it's the favorite "feel good time" for politicians to decide how people should use their own money: the minimum wage.

Just a couple of important points that you don't mention:

-Poor people are not poor because of low wages. For the most part, they're poor because of low productivity, and wages are connected to productivity. The only way to raise real wages is by increasing productivity.

-Employers must pay for legally required worker benefits that include Social Security, Medicare, unemployment insurance, workers' compensation, health and disability insurance benefits, and whatever paid leave benefits they offer, such as vacations, holidays and sick leave. Forcing a higher minimum wage just forces an extra cost on employers... who, after all, create jobs.

If raising the minimum wage is so good, why stop at a couple of bucks? Why not $5 or $10? Better yet, why not decree a worldwide minimum wage to end poverty?

Finally, you write: "The worst that can be said is that a higher minimum wage will add, very modestly, to overall inflation."

Don't tell that to the Bolivians, who suffered 23,000% annual inflation during the 1980s because its goverment decided to "feel good" and "do the right thing" by raising the minimum wage.

Steven Pearlstein: Well, this is very standard economist speak. First, the minimum wage is a social policy, not an economic policy. Obviously, in a truely free labor market, wages reflect producitivity, and a minimum wage violates that rule. But as a matter of social policy, we have decided we want to use this as one mechanisms for estalbishing a floor in the standard of living for working people, and we are willing to give up some economic efficiency and engage in a bit of income redistribution to do so. You may not prefer that, but a majority of the rest of us do. If you don't like it, you might consider moving to some country that doesn't have one -- except you'll have trouble finding one, since most of the rest of the world believes this as well.

Now, as you point out, you can take this too far, as they have in parts of Europe, where the minimum wage and other employment taxes have had a very deliterious effect on employment and growth. So it is not something you want to push too far. It is a matter of political judgment. It is not a matter of mathematics.

Your use of the Bolivian example shows that you are not being intellectually honest. The countries and the economies are extremely different so as to be almost imcomparable, and the minimum wage here is modest-- so much so that it is below the market wage for unskillled workers in a good deal of the country.

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Bethesda, Md.: While I respect your knowledge of business and economics, I completely disagree with you on your statement that increasing the minimum wage will not hurt small business or overall economic growth. A business owner clearly will think twice about hiring an additional person if he is required to pay that person (and all of his other employees) more. In small business, heart wrenching decisions are made every day about costs, payroll, benefits, etc. Every $1 increase is actually a 1.08 increase because of paryoll taxes.

And, even if small businesses are only providing half of all new jobs created as you assert, that's still a huge chunk of job growth that is curtailed by a higher minimum wage.

Unemployment is low and the market efficiently drives what wages should be paid.

Steven Pearlstein: This is a difficult economic issue to discuss with small business owners, in part because it raises questions about the viability of businesses. It may well be that, at the margin, there are some small businesses that will be put out of business by higher labor costs required by a higher minimum wage,and others that are forced to cut back on hiring, which may mean cutting back on service, which may lead to a decline in business. But the question is not only whether that means the minimum wage is misguided, but whether those businesses are really viable in the first place. If a small business closes, its sales will not disappear -- they will be shifted to another store or supplier that is more efficient and may actually add employees to handle the increased business. So it is wrong, as a matter of economic analysis, to equate the fate of one or even dozens of small business with the fate of the economy.

The way I look at it, in 2007 in the United States, the richest country int he world, if a business can't survive by paying its workers at least $7.15 an hour, competing against other businesses that pay at least $7.15 an hour, then it doesn't have a viable American business. That may be harsh news, and it may reflect the country's social values. But so be it.

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New York, N.Y.: I appreciated your column today. I would add that there's nothing inherently evil about labor costs. Unless you're willing to engage in slavery, which is for the moment illegal, you have to pay the people who do the work you need done. I think that a business owner who cannot plan for a slight increase in labor costs once in a decade isn't very good at management.

We have foolish expectations about profit in this county. You're not entitled to a substantial profit every year, any more than your employees are entitled to a substantial raise every year. Some years, your costs are a little higher and your profit is a little less and if it's because you have to pay your clerks a little more, nobody's picking on you. That's life and it's the cost of doing business. Get over it.

Steven Pearlstein: Well put, in a marvelously New York kind of way.

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Washington, D.C.: Why stop at a small raise? We should raise the minimum wage to $30.00/hr! No one would be poor anymore! Brilliant! I'm sure this proposal makes perfect sense to Democrats, and it's only the Evil Republicans(TM) who are opposing it because they hate poor people.

Steven Pearlstein: The reason is that $30 is unreasonable and $7.15 is not. This is a silly argument you make, really. You could say the same about taxes, which conservatives once did: If you put an income tax of 1 percent, why not 30 percent, or 50 percent? Where will it stop? Well, it stops where it doesn't work. We know 50 percent tax rates don't work, but 30 percent marginal tax rates seems to be okay. Similarly, we know from Europe that high minimum wages plus employment taxes doesn't generate the best outcome, but a lower amount does pretty well here, where employment and economic growth are pretty robust. Taking every argument to its logical extreme is.. well, illogical.

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Washington, D.C.: Great column. The current argument over minimum wage vs. business seems to forget what the real goal is here: improving living conditions for people. Nothing against small business, but if a business can't make it while paying a sufficient wage to live on, maybe it shouldn't be in business. I'm sure we could create a lot more businesses if they could pay $1 an hour, but what would be the point?

Steven Pearlstein: Precisely.

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Richmond, Va.: Great piece today. Don't many small businesses, especially single proprietorships skirt many workers rights regulations by paying under the table? Many of my jobs before and during my college years were like this: where thy may have payed me slightly above the minimum wage, but they clearly failed to contribute to my social security or cover me with unemployment insurance or workers comp. You noted the level in which small business skips their tax burden, they also frequently skirt other burdens as well.

Steven Pearlstein: I can assure you that if every Lexus leased by a business was reviewed by the IRS to see if it was, indeed, a legitimate business expenses, Lexus would lose a big chunk of its business.

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Madison, Wisc.: Thanks for your column and for taking questions today. The latest counter-argument to raising the minimum wage is that we should be raising the Earned Income Credit instead. The EIC, proponents say, is more targeted to poor people and will result in a net increase in the income of poor wage earners that is greater than provided by the minimum wage. What are your thoughts on this argument? Thanks again.

Steven Pearlstein: There is some problem with raising the EITC too much more, in that, to avoid having high marginal tax rates, you have to offer to to a much larger number of workers, and it gets very very expensive. There is one suggestion, from Jason Furman, I believe, that law should be changed to establish a third category of benefits for people with three or more children (right now, everyone with two or more is lumped into the same benefit category). And this category could raise EITC payments for those with more kids. That seems reasonable.

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McLean, Va.: Hi Steve.

What about Wal-Mart? You said in your article that small businesses might have to raise their prices a little but its okay because they are competing with other small businesses who will also raise their prices. If they raise their prices won't people just go to Wal-Mart? Wal-Mart's prices are already so low its hard to compete with them. Also, they are such a large company that this pay raise won't hurt them. It might actually help them because if the competing small businesses go under than that's less competition. So I have to disagree with your statement "The worst that can be said is that a higher minimum wage will add, very modestly, to overall inflation".

Steven Pearlstein: Well, if Wal-Mart, which generally pays above minimum wage, can offer the same goods at lower prices, then I really don't see the problem. Yes, some small businesses may close. Others may open, to challenge Wal-mart on the higher end of things, for consumers who demand more quality or better service or more variety and style. That's what a free market is all about. Its not about preserving small businesses or jobs in small businesses.

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Arlington, Va.: You are wise to preempt the objection that a minimum wage will be most costly to small business, as they are the biggest minimum-wage-paying employers. Doing so, however, by labeling small business owners as "tax cheats" and somehow less significant as employers than the Googles and Southwests is unfair. Small business contribute in ways large corporations cannot. They are nimble enough to make decisions to best serve their smaller clientele, have a bigger stake in the welfare of their community, and have much closer relationships with rank-and-file employees. "Rearranging the economy" to the detriment of small business in favor of large corporations can't possibly be good for anyone.

Steven Pearlstein: To the degree small businesses are nimbler, and nimbler is what customers value, that's great. But I don't think we need to have a polilcy to favor any one size business. We might want to have policies that govern how companies treat employees, or how companies behave as corporate citizens, but there is no reason to believe that companies of any size are morally, economically or in any other way superior to others just because of size. Sometimes there are efficiencies of scale, and the market rewards that. Sometimes there are inefficiencies of scale (lack of nimbleness), and the market rewards that. But let's let the market do it.

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Grand Rapids, Mich.: Hi, didnt know you had this live thing. I sent you an email thanking you for stating the obvious and added a bunch of my own viewpoints and comments to it. Hope you can continue to pull the shroud off the truth behind the greedy businesses in America that all want a get rich quick scheme, and the politicians whose pockets they are lining. Poor people cannot give donations to Politicians, yet those same politicians have an obligation to fight for them, and produce legislation that helps them. And it may surprise them to know that 50% of the US makes less than 41K per year household income - IRS. Thats small businesses customer base. Pay them more, they will spend it right back into the same community. Something wealthy people dont do.

Steven Pearlstein: Well, I'm glad you like the column, although I'll disassociate myself with the idea that all businesses are "greedy, get rich quick schemes" and all politicians are corrupt. What would you call workers who always want and think they deserve a raise? Greedy? I'd call them human. And the same goes for business owners who want more profits. That's the beauty of capitalism. And no, its not true that rich people don't spend their income but poor people do. Rich people spend plenty. And to the degree they invest rather than consume their income, that's very useful too in a capitalist economy. Where do you think the capital in capitalism comes from?

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Conifer, Colo.: In your use of the statistics from Veronique de Rugy, you state, "The biggest lie of all is that small businesses have created most of the new jobs in America. as economist Veronique de Rugy of the American Enterprise Institute reported in a paper last year, new jobs have been created by both large and small businesses in roughly the same proportion." How do you and de Rugy account for the massive lay-offs at large corporations such as Ford, United Airlines, AOL and the like? Shouldn't job-loss be taken into account when determining a certain sector's impact on gob growth?

Steven Pearlstein: No, they really shouldn't. Some big firms are reducing employment. So what? Other big firms are creating large numbers of jobs. What's the point of lumping every business into one of two pots, big and small, and calculating the net job impact. What you want to know is where the new jobs are being created, gross job creation, and in that regard, lots of jobs are being created in big business. Are you making some kind of moral point that because big businesses are cutting jobs, they are BAD. And if they are outsourcing that same work to small companies, are those small companies suddenly brillant and GOOD. Let's be grown up about this, shall we.

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Tempe, Ariz.: As an owner of a restaurant, I am very scared about the idea of paying my servers $7.25/hour. After checking my books, I may have to close up shop without some kind of government assistance. I have heard some discussion of a possible tip credit...What do you think of the implementaton of a tip credit?

Steven Pearlstein: There are lots of intricacies to the minimum wage as it relates to restaurant workers that, I admit, I'm not up on. But there is a rationale, given the way people pay for restaurant services, to consider tips as an offset for the minimum wage.

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Center Moriches, N.Y.: My goodness, Steven, what's your beef with small business? It's hard to figure out where to start with your column today. Look at the data, and you discover that small businesses do in fact create the bulk of new jobs in the economy. Use a little math, and one discovers that a higher government mandated wage means higher costs for small business. Those costs cannot be wished away, but are quite real. Finally, economic theory, history and analysis clearly show that hiking the minimum wage hurts inexperienced workers and small businesses. Finally, by the way, inflation is a monetary phenomenon. Perhaps more economics and less politics is warranted for the type of column you write.

Steven Pearlstein: If inflation were purely a monetary phenomenon, then why is it that the hike in oil and gaoline prices greatly increased inflation. Sorry, but that's just a silly application of Milton Friedman's nostrum. As to my beef with small business, it is only with those who claim that small business creates all the new jobs, which is not true, while at the same time deserves all sorts of special tax breaks and set asides and subisized loans. Let me ask you this: if small business was already doing such a bang up job, and big business was destroying jobs and economic growth, shouldn't we send the subsidies to BIG business?

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Ann Arbor, Mich.: You say that the government setting wages is a bad thing, but that's exactly what a minimum wage is! Your article says that economic theory suggest the small business owners will just pass along the cost to consumers. Is that a good thing? Clearly, economic theory also suggests that those owners would also lose profits and they would also hire fewer workers. It is important to note that economic theory says a minimum wage is not efficient and will hurt the economy.

Steven Pearlstein: You are right to call me on one thing: I don't believe in government wage setting except this one instance of modest minimum wage, which is a social and political choice to redistribute income and give up a bit of economic efficiency.

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20003: Just crunching some numbers...7.15 an hour equal about 250 bucks a week after taxes and assuming no overtime. Of course, overtime is near impossible for alot of these minimum wage jobs due to corporate policies about that kind of thing. Assuming you get about 39 hours a week every week for a year, that's a bit over 13 grand a year.

Who can live on 13 grand a year anywhere? Even if you have a family where there are 2 parents earning minimum wage to, up to say 10 dollars an hour, and one teenager at minimum wage part-time, you're still earning barely 35,000 a year for the whole family. Raising the minimum wage is barely scratching the surface of the larger economic problems, though it is at least something.

Steven Pearlstein: Obviously, there are two ends of the telescope to look at this issue. One is what businesses can "afford" to pay. The other is what people can "afford" to live on. As a society, its important to look through both ends of the telescope before setting policy.

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Spotsylvania, Va.: In my first job - 1950 - I earned the minimum wage - $.50 per hour. By time I left a community college and went off to a four year college five years later, it had risen to $.75. The minimum wage during those years was pegged at roughly the poverty level for a family of three.

For similar buying power today, the minimum wage should be in the neighborhood of $11.00.

Steven Pearlstein: That's sounds right, which calls into question all the bellyaching about a $7.15 minimum wage over the next two years.

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Anonymous: Steve, I didn't like your response to my question. You're saying that Wal-Mart should be the only store in the country? They pay higher, have lower prices, employ more people. Maybe we only should have them. Small businesses make this country great. You also mentioned earlier that this is more of a "social" policy. So if its not all about money and more about people why not have small bussisses even though they arent the most economically efficient.

Steven Pearlstein: Who says Wal-mart should be the only store in the country? Not me. And there's no reason to expect that it will be. Have you looked at Wal-mart stock lately?

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Great Falls, Va.: I usually find your column to be one of the high points in the Post, but today's was a loser. The entire piece begged the question: why is an increase in the minimum wage helpful? The 1% making minimum wage are largely teenagers, who have their necessities supplied to them. Their increase will go to Apple's bottom line, or some such. The people who are struggling today are either (a) making slightly above minimum wage, but cannot make ends meet with a rising cost of living, parenting obligations, etc., or (b) working jobs that are exempt from the minimum wage requirements, such as agricultural or food service.

Steven Pearlstein: The minimum wage doesn't just affect people who make the minimum wage, but people whose wages are just above it. The literature is pretty clear on that. Maybe 15 million workers will be impacted eventually, many of them adults. In theory, I don't have a problem with a teen age minimum wage below the adult one, although it raises the problem of employers replacing adult workers with teenagers.

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Yorktown Heights, N.Y.: Hi Steven,

There are obvious political risks, but why aren't there more serious discussions about fixing the tax system to tax those who are more generously compensated, especially those who are ridiculously compensated at a much higher rate than those who are less well off. I understand that there are such things as tax brackets and other ways to tax the higher earners (even though the government has been steadily trying to reduce these measure), but why can't this idea be taken a step further if an individual makes, say, 250,000,000 a year, can't we hit with like a 50-70% tax? Wouldn't that help balance the budget and make it easier to reduce the burden on lower and middle income folks? Do you have any idea how a scenario like that would work out? Just curious to know if anyone has run the numbers in such a way.

Thanks!

Steven Pearlstein:50 percent tax rates and higher would bring us to levels where you get lots of tax avoidance and some diminutiono f work effort and investment. The evidence on that is pretty clear, particularly in a country like ours (as opposed to Sweden).

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Washington, D.C.: Love the minimum wage coverage today, and glad you are here taking questions.

I come down on the side of 5.15/hour is not enough to pay anyone to do anything. But I also agree that there will always be a lower class/low wage earners. I support the increase. But reading Dave Finkel's article I wonder if the small business tax breaks are not worth more consideration on my part. I've always dismissed that idea. But it does seem like the Wal-Mart's would really win out with this increase.

washingtonpost.com: Life at $7.25 an Hour by David Finkel and Minimum Wage, Maximum Myth by Steven Pearlstein

Steven Pearlstein: Turns out the tax breaks they are talking about won't directly help the employers of minimum wage workers all that much. And as I said before, it may be these are pretty marginal businesses anyway, as harsh as it is to say. But then again, capitalism is harsh, isn't it, for both workers and companies.

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Mt. Rainier, Md.: A letter yesterday pointed out that George Will's statistics regarding who would be affected was absolutely incorrect because he compared only current minimum wage earners against the proposed gain, not all the people earning between the current minimum and the new. Those people earning $6 an hour will be delighted too. Not mentioned anywhere that I have seen is the question of employees who don't get minimum wage at all. Why should people working for dry cleaners not get a living wage???

Steven Pearlstein: Yes, Mr. Will needs to check his math. But he was never very good at economics, was he? Bad training at Trinity College, Hartford, I presume.

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Washington, D.C.: Thank you! I'm so sick of the way we talk about preserving small businesses as though they are somehow morally superior to businesses of other sizes and therefore need to be preserved. It's almost as bad as family farms...

Steven Pearlstein: Precisely. And, by the way, farms are very big payers of the minimum wage.

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Washington, D.C.: Steve, explain to me why I should have to pay higher prices to achieve your vision of social justice? If you support higher wages so much, how about you and others with similar beliefs patronize stores that pay their employees more and leave the rest of us alone?

It's none of your business what two consenting adults (employee and employer) decide to do in the marketplace.

Steven Pearlstein: Really. So we should get rid of work safety standards? And employer contribution to Social Security? And laws about overtime? That's an interesting society, you have in mind. I'd prefer not to live there, however.

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David New York, N.Y.: As a small business owner, I learned very quickly that paying one good employee a wage well above the minimum wage is much better than paying 3 mediocre employees a minimum wage, so the minimum wage argument to me is essentially moot. I firmly believe I actually save money by hiring and paying good employees $12 to $15/hr instead of overstaffing and recycling $6 to $7 hr employees who are unmotivated and not very useful.

Steven Pearlstein: Thank you. Thank you. Thank you.

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Clifton, Va.: Some folks are just minimum wagers. They either don't have the intelligence or drive to get any further. Back when I graduated college the econmy sucked in 81. It took me a few years to find a good job. Did I whine no I continued to look etc. I was making minimum wage back then $2.25. My advice stop whining and go back to school or find a skill. Mercedes, Lexus and BMW are all crying for auto techs. They pay for your schooling which lasts about 2 years and guarantee employment after completion of the program. In this area it means an entry level auto tech job making approx $50k and when you reach journeyman level you are making $110,000. Other trades will pay for your training as a plumber, electrician etc. Or get off your butt an enlist. But stop whining and do something about your situation. Have a buddy who after his divorce 25 years ago was broke and making minimum wage at Mcd's. Now he owns 12 Mcd's franchises to include a couple at National Airport. He did it all on his own. Stop whining.

Steven Pearlstein: Hey, I agree with you almost completely. But there are people in any society that have limited abilities and ambitions, or can't move out of rural areas with limited opportunities because they are caring for family, etc. And there ought to be a pay floor for just showing up and working for them -- a floor high enough to keep them out of dire poverty, but low enough to give them all the incentive they need to get those skills. That's why this is a judgment call, not a matter of mathematics or ideology. And I'm pretty sure living at $7.15 still gives people plenty of incentive to do better.

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Steven Pearlstein: I got to jump, folks. But I'm going to print the other comments in the queue now before I leave, without much comment. Thanks.

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Frederick, Md.: Isn't this more a question of making a living? How to compensate one for their work?

America NEEDS those minimum wage workers. Won't increasing the minimum wage attract more workers at that wage? Won't an increase likely increase the likelihood of working that extra OT hour? Wouldn't an increase of work(ers) (in America, at this time) at the minimum wage level far out way any detriment to small business costs?

Steven Pearlstein: Thanks.

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Alexandria, Va.: I agree with a social policy that protects against exploitation of workers by businesses, and also with your argument that if a business can't compete by paying their workers 'living' wages, then perhaps they shouldn't exist. The main problem I have with a minimum wage is the assumption that people making this wage are sole-providers.

I think back to my high-school days, and finding low-paying jobs to make some extra money, and gain work expxerience. Certainly i wasn't living off of this wage. If a higher min-wage was put into place, isn't there a chance that these jobs would become more scarce? It just seems like there are always unintented consequences of certain laws with good intentions. It seems to me that if workers (especially part-time or younger workers) agree to take these jobs, then why is that a problem? Are there any stastics on what percentage of people making minimum wage are actually the sole-providers and not just part-time or students?

Steven Pearlstein: Thanks.

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Freising, Germany: I've heard some comments about minimum wage and productivity, and personally I'm not of the opinion that the two are mutually exclusive.

The effects of low wages are a large turnover and a less responsible workforce.

A constant influx of new employees will continue to make beginners mistakes and, if they are only intending to stay until they find something better, they will be less motivated and less dependable than those who are intending to stay longer at the company.

Steven Pearlstein: Thanks.

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Tampa, Fla.: It seems to me, starting with the Reagan administration, the U.S. has focused on the individual aquisition of wealth over collective economic security. I believe our tax and econcomic policy facilitates this. As I have argued with my Republican colleagues, we all benefit from a relatively peaceful society, without rampanent crime, partially because we aid the poor. Unless the well-off wish to live in armed camps, we need to continue to aid the working poor through mechanisms like increasing the minimum wage. Darwinian capitalism is a recipe for social disorder.

Steven Pearlstein: Thanks.

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Silver Spring, Md.: In general, to start, I hugely support the long needed increase to the minimum wage. Unfortunately, I have to disagree with your analysis from history about it's effects on small businesses - largely becasue the is really zero historical precident for our current small business environment. Never before has so much of our retail market been dominated by giants like walmart and so on. Never before has american manufacturing with a liveable minimum wage been forced to compete head on with foreign competition whose employees don't benefit from such labor protection. So while I agree that we NEED to protect our labor force and pay them a living wage - History certainly doesn't calm any fears. I can easily imagine a situation in which walmart absorbing that increase with an average 0.5% price hike, but it requiring a 5% price hike for mom & pops - simply due to the basic economy of scale. So, while I can't speak in support enough of the Ford mantra of paying your employees enough to buy your products, I fear that those minimum wage workers at the mom and pops will be even more encouraged to go spend their paychecks at walmart than ever before - and while I'm by no means saying the answer is to not increase the minimum wage or to cut taxes, I question the fact that we really have any accurate historical precident to speak on here.

Steven Pearlstein: Thanks.

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Tip Credit?: Unless AZ has some sort of state law, serves are generally exempt from being guaranteed minimum wage. That goes to anyone in a position to receive tips. I spoke to one man, a valet parker and he doesn't get min wage because he gets "tips".

Steven Pearlstein: Thanks.

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Great Falls, Va.: Strictly from an economics perspective, wouldn't the most effective means to improve the condition of poor Americans be to enforce immigration laws?

Steven Pearlstein: Thanks.

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Conifer, Colo.: I'll echo your comment about "let's be grown-up about this," You missed my point entirely with regards to job creation. In no way did I state or imply that large companies are BAD or small businesses are GOOD.

I was calling into question your logic in only using new job creation statisics rather than taking a macro-look at job creation. If you really care about getting a true picture of job growth, you have to look at net-job creation.

You wouldn't balance your checkbook by only writing down your deposits, would you?

Steven Pearlstein: Thanks.

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New York, N.Y.: Isn't the political fallout to raising the minimum wage the fact that increasing wages will increase the poverty level, thus technically increasing the number of people who live below the poverty line? Then politicians have to worry about an increase in poverty under there watch.

Steven Pearlstein: Thanks.

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Philadelphia, Pa.: Another point-- in many states, raising the federal minimum wage will have absolutely no effect, on small businesses or otherwise, since many states have passed their own, higher, minimum wage laws. The federal government is playing catch-up to the states again.

Steven Pearlstein: Thanks.

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Grand Rapids, Mich: To the Washington D.C. person that suggested the extreme 30.00/ hr is the same as 7.15/hr.

It only makes sense to people with a brain in their heads. And no democrats dont think that Republicans Hate poor people.. Republicans LOVE poor people. They get all their money from squeezing poor people for every drop of money they can get out of them. Remember you make more money taking a quarter from 75 million people than a dollar from 100,000. In fact, Republicans love to Make more poor people because thats how they keep them at that level and continue to squeeze them.

Steven Pearlstein: Thanks.

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Silver Spring, Md.: Not sure this is appropriate, but the argument against raising the minimum wage reminds me of the argument agianst the FMLA as signed by President Clinton. Big business argued that the sky would fall if enacted. Doesn't seemed to happened. It's a very reasonable increase that is long overdue.

Steven Pearlstein: Thanks.

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Dunn Loring, Va.:"My guess is you're thinking they're Republicans who don't vote in their own economic interest." Actually, no. I have no idea what party but wouldn't be surprised to find out that they never vote, don't know who their local congressperson is, and have no interest in knowing. My point is that only when the very poor begin to vote in large numbers, will their economic futures change. The reason the minimum wage hasn't changed in ten years is those that earn it have no lobby and don't vote while the small and large businesses have lobbies, vote, and contribute to PACs, etc. That's a sad truth, unfortunately.

Steven Pearlstein: Thanks.

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Claverack, N.Y.: Not an economics comment, but a politics comment. I thought everything about your column today was correct except one. In your swipes at Max Baucus, you said something to the effect that because he's a Democrat in Montana, he's an endangered species.

Montana in the last two election cycles has elected a Democratic AND senator. The state leg is Democratic, both houses.

A Democrat in Montana's about as endangered as a deer in the suburbs- it's sad when it gets run over, but there are plenty more where that came from.

Steven Pearlstein: Thanks.

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Washington, D.C.: You said, "Turns out the tax breaks they are talking about won't directly help the employers of minimum wage workers all that much." What WILL they do, then?

Steven Pearlstein: Thanks.

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more on small businesses: I find it very hard to believe that raising the minimum wage in this small degree will have much, if any affect on small business owners. Yes, maybe they will have to spend more time overseeing their employees and not hire the first guy they meet, but there's nothing wrong with that. This is no different than gas prices skyrocketing, insurance costs going up, etc. If they know what they're doing, they'll be ok. Who knows, maybe their workers will work harder now that it seems they are valued more!

Steven Pearlstein: Thanks.

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Washington, D.C.: Regarding the minimum wage, can't it simply be that small businesses, restaurants, etc, are rational actors advocating policy in their best interests? Even the soundest and best-intentioned social policy has winners and losers, and small businesses are often the losers. The effect is dynamic, and smaller firms, teenage workers, starting jobs will feel the pinch. And if, as you just wrote, "Not a good idea for government to set prices or wages. Ever." -- why is that not the case here? Are the sallaries of the big guys somehow more deserving of pristine economic orthodoxy?

Steven Pearlstein: Thanks.

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McLean, Va.: While I agree that more tax breaks for businesses, of any size, are stupid and to be avoided because they benefit the few at the expense of everyone else, I also think that an increase in the minimum wage is the same thing. It's a subsidy to the affluent teenagers of America (the vast majority of minimum wage earners live in households with income well above the national median) at the expense of consumers.

Very few adults actually hold minimum wage jobs, and those that do often get raises within months of being hired, if their productivity is up to snuff. And if it isn't, then federal legislation won't make it so.

Steven Pearlstein: Thanks.

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Capital Hill: In response to your response to "Bethesda" So you are saying that the only store in America should be Wal-Mart? They are the best value and can hire the most employees. Why not just make a whole country of them.

Steven Pearlstein: Thanks.

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Austin, Texas: The introduction of minimum wage as part of NIRA in 1933 cost 500,000 blacks their jobs as racist whites pushed blacks out first. Why the effect was significant was because it occurred during an economic downturn. All studies I have seen about the effects of increases in minum wage have been done during relatively good economies. When the vicious effect of increasing minimum wage is felt among the working poor that it is supposed to help is during the next cyclical economic downturn. At that point, the government forced additional cost can't be passed to the customer because not enough customers are there, and more people on minimum wage get fired than if the minimum wage wasn't increased. Because of the usual long period of time between the passage of a minimum wage increase and the next cyclical econbomic downturn, minimum wage increase proponents are able to avoid the cause and effect blame. The government causes more harm in the long run than good in its attempt for shortsighted "help". The working poor who are most devastated by minimum wage increases are only 7% of those who earn minimum wage. The rest are mostly school kids earning extra money. So, I guess minimum wage increase proponents want to screw the poor in order to give their kids more pocket change.

Steven Pearlstein: Thanks.

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Tampa, Fla.: Great column today! You nailed it!

The voters of Florida passed an increase in the state minimum wage 2 years ago. In spite of the same doom-and-gloom rants by "small business" (actually funded by big business), there was NO drop in employment in small business due to the increase in the minimum wage.

But we know that Baucus won't care about facts and reality. Maybe we should hope he loses hi next reelection bid, as the Dems should pick up enough Senate seats in '08 to not need him, at least according to the Post's political writers.

Steven Pearlstein: Thanks.

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