Two breaks that can help business growth in Mass.
Paul D. Craney
Massachusetts continues to receive low marks in economic competitiveness rankings, and doing business here remains expensive. Just last year, CNBC rated Massachusetts 47th in its annual “cost of doing business” rankings. In addition, the Bay State's unemployment rate is now higher than the national rate, the first time that has happened in 10 years. Couple these problems with the rollout of the Affordable Care Act (Obamacare) and a proposal to increase the state's minimum wage from $8 to $11 per hour, and businesses across Massachusetts are facing significant challenges just trying to keep the doors open.
The state Senate recently voted to increase the minimum wage from $8 per hour to $11 by 2016, and tie future increases to the rate of inflation. House leaders are considering raising the minimum wage along with reforming unemployment insurance as one bill. But they would be better off separating the two and addressing each issue on its own merits.
The debate over raising the wage continues to draw emotion: proponents see the issues as a matter of fairness. In contrast to some perceptions, a majority of minimum-wage workers are teenagers entering the workforce, not adults trying to raise a family. According to the U.S. Bureau of Labor Statistics (BLS), 21 percent of employed teenagers earn minimum wage or less, compared with about 3 percent of workers age 25 and over. Of this small percentage, 94 percent also have spouses who work. Many studies also show that increasing the minimum wage actually cuts jobs and does not reduce poverty levels. Additionally, nearly two-thirds of minimum-wage earners receive raises in their first year of employment, according to a 2004 report from the Employment Policies Institute.
While an increase to the minimum wage essentially removes a rung on a ladder for less skilled workers and makes the cost of doing business more expensive, one Central Massachusetts lawmaker is proposing legislation that will ease costs for business owners; he should be applauded.
Recently, the Legislature's Committee on Labor and the Workforce held a hearing on a bill that would lower the cost of doing business and make Massachusetts more competitive. That bill, introduced by Rep. Kevin Kuros, R-Uxbridge, would reduce the cost of opening and maintaining a small business. The bill would eliminate the $500 cost of forming a limited liability company, or LLC, and it would lower the annual filing fee for an LLC from $500 to $125.
While $375 may not be much for larger companies, it's a hefty additional cost for entrepreneurs thinking about starting their own companies. We have some of the best colleges and universities in the country, so let's make it a little easier for those who graduate from colleges in the Bay State to open their own businesses. They will save more under the Kuros proposal, which they can apply toward the numerous other arbitrary state mandates or the generally high cost of doing business in Massachusetts.
Rep. Kuros' legislation is exactly the type of creative, small business-friendly idea that will help spur economic growth and job creation. Lawmakers are elected with the purpose of making the lives of their constituents a little bit better, and the Kuros bill would do just that.
But raising the minimum wage would be more of a hindrance than a help. It's the wrong approach for Massachusetts.
Paul D. Craney is executive director of the Massachusetts Fiscal Alliance.
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