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Wage hike would hurt business
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The fight over the minimum wage, which President Obama and Democrats hope to make a centerpiece of this year's midterm elections, comes down to two simple arguments. Obama says low-income working Americans deserve a raise, while Republicans say raising the minimum wage would cost jobs.
It was a mostly theoretical argument until Feb. 12, when Obama signed an executive order raising the minimum wage for employees of federal contractors to $10.10 an hour from $7.25.
Obama's order does not take effect until Jan. 1, 2015. But there are signs it is already having an effect -- and it is not what the president and his party said it would be.
In late March, the publication Military Times reported three McDonald's fast-food restaurants, plus one other lesser-known food outlet, will soon close at Navy bases, while other national-name chains have "asked to be released from their Army and Air Force Exchange Service contracts to operate fast-food restaurants at two other installations."
Military Times quoted sources saying the closures are related to the coming mandatory wage increases, with one source saying they are "the tip of the iceberg."
The closures, real and contemplated, are a serious concern to 40 Republican members of the House Armed Services and Education and Workforce committees, who this month wrote Labor Secretary Thomas Perez asking the mandatory increase not apply to some businesses on military bases.
The administration is making it very expensive to do business on military bases, and not just because of the minimum wage. Under federal contracting law, some businesses operating on military installations must also pay their workers something called a health and welfare payment, which last year was $2.56 an hour but which the administration has now raised to $3.81 an hour.
In the past, fast-food employers did not have to pay the health and welfare payment, but last fall the Obama Labor Department ruled they must. So add $3.81 per hour, per employee to the employers' cost. And then add Obama's $2.85 an hour increase in the minimum wage. That's a back-breaking burden.
And one more thing. Military contracting laws do not allow businesses to raise their prices above the level prevailing in the local community. The fast-food operators can't charge more to make up their losses.
The Obama administration knows it is placing a massive burden on businesses that operate on military bases. A few days ago, the Labor Department temporarily rescinded some of the new costs while it "re-evaluates" its actions. But President Obama's executive order is still there, waiting to go into effect.
Under any conceivable scenario, Obama's edict, combined with his administration's policies, will place unbearable new burdens on businesses at military bases and, yes, result in fewer jobs. It looks like the president's critics were right.
Byron York is chief political correspondent for The Washington Examiner.