Obama And The SEIU’s Mandated Wage Hikes Will Stifle Economic Growth

Photo of Hector Barreto
Hector Barreto
National Board, U.S. Chamber of Commerce
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      Hector Barreto

      Hector V. Barreto is a nationally recognized businessman and community leader. He served five years as the Administrator of the U. S. Small Business Administration after being appointed by President George W. Bush and unanimously approved by the United States Senate on July 25, 2001.

      During his stewardship, the SBA exceeded all previous records in small business loans, women and minority owned business support, disaster relief and private-public sector procurement opportunities. Barreto directed the delivery of financial and business development programs to America’s entrepreneurs from a portfolio of direct, guaranteed and disaster loans totaling more than $60 billion.

      Upon his return to the private sector, he has assumed leadership in a wide range of business, civic and charitable activities. Mr. Barreto also serves as the Chairman of The Latino Coalition (www.TheLatinoCoalition.com), a national organization that represents Latino interests with senior executives of many Fortune 500 companies and government agencies.

      Mr. Barreto is a member on the National Board of the United States Chamber of Commerce and serves on the council on small business. He is the Founder of “Tributo a mi Padre, Tequila” (http://TributoTequila.com) in honor of his late father Hector Barreto Sr. Tributo tequila was recently awarded the prestigious 5 star diamond award by the American academy of hospitality sciences and is the only Tequila in the word with this designation. Hector Barreto is also the founder and president of Barreto Associates (http://BarretoInc.com), a Southern California based international business consulting firm developing relationships between major corporations, government agencies and small businesses. The firm has extensive experience in marketing, fundraising, insurance and finance.

      In addition, Mr. Barreto was the founder and former Chairman of Business Matchmaking, the nation’s leading non-profit small business procurement program. Business Matchmaking brings together countless entrepreneurs, including women, minority and veteran owned small business owners with procurement representatives of federal and local government agencies and several hundred major corporations. Since its inception Business Matchmaking has been responsible for over 80,000 face to face meetings and facilitated the granting of more than $80 billion in verifiable contracts for small firms. As a young man, he helped his father manage a family restaurant, an export/import business and construction company. After receiving his Bachelor’s degree in Business Administration from Rockhurst University in Kansas City, Missouri, he worked for the Miller Brewing Company as the South Texas Area Manager. In 1986, he moved to California and founded Barreto Insurance and Financial Services, responding to the needs for Southern California’s rapidly growing population. He later became a securities broker/dealer specializing in retirement plans.

      Mr. Barreto is the former vice chairman of the United States Hispanic Chamber (founded by his father, Hector Barreto Sr.) and the past chairman of the board of the Latin Business Association in Los Angeles. During his term, he increased membership by 50 percent, doubled revenues and substantially increased procurement opportunities for entrepreneurs’. He also founded a small business institute/incubator, which provides technical assistance, education and development opportunities to small businesses.

      He was appointed by Governor Arnold Schwarzenegger to serve as Commissioner on the California Commission for Economic Development. Hector Barreto was inducted into the Minority Business Hall of Fame and has received special recognition from many groups including the U.S. Congress, the California State Senate and Assembly, the County of Los Angeles, YMCA and American Red Cross. In 2006, he was honored by the President Fox of Mexico with the prestigious Aguila Azteca award, the highest recognition bestowed to a citizen of another country. He is frequently identified in key publications as one the most influential Hispanic business leaders in the country. Mr. Barreto is the author of “The Engine of America” (http://TheEngineofAmerica.com) which provides motivation and inspiration for entrepreneurs through the stories and ideas of business leaders nationally.
      Aside from his private business interests, he is a frequent speaker and media guest, panelist and commentator on issues of concern to small business interests.
      Mr. Barreto resides in Southern California with his wife Robin, son and two daughters.

Hundreds of restaurant workers across the country and around the world have recently joined in protests to demand a higher minimum wage. In major U.S. cities like New York and Washington, D.C., but also as far away as Tokyo and Zurich, workers – and labor activists – gathered to call for an increase in the minimum wage to $15 an hour. Of course, these protests were hardly the organic expressions of our cherished right to free speech that some would have us believe. USA Today reports that the actions were led by Fast Food Forward, an activist group funded by the massive Service Employees International Union (SEIU), which has reportedly spent some $15 million on these displays since last January.

Unfortunately, Big Labor is once again stirring up American workers to support a policy that may line union bosses’ pockets, but will ultimately end up hurting the workers themselves.  This time, however, they’ve got some serious allies. President Obama himself, along with former Speaker Nancy Pelosi, Senate Majority Leader Harry Reid, among various members of Congress, is calling for an increase in the federal minimum wage. The president isn’t going as far as the union bosses – he’s pushing to raise the wage to $10.10 an hour, not $15.00 as demanded by the SEIU protestors – but his proposal would still mean an increase of a drastic 40 percent.

Recent surveys indicate that an increase to $10.10, not even as high as the SEIU is demanding, would still damage our economy and kill American jobs. One survey of small to medium-sized businesses reported that under this proposal, almost a third would face a negative impact on their future hiring plans. Another survey found that nearly 40 percent would have to lay off workers. The Congressional Budget Office (CBO) has even estimated that such an increase could cost up to one million jobs.

And more research has found that raising the minimum wage to $10.10 would be especially hard to swallow for the restaurant industry. The National Restaurant Association estimates that this wage hike would immediately slap a 22 percent increase in labor costs on the typical restaurant. This would have a ripple effect, leading to a 58 percent drop in the restaurant’s income, before taxes. Many restaurants have narrow profit margins as it is and this would only ramp up the pressure. In addition, food costs are continuing to rise on their own and combining this with increased labor costs brought on by a minimum wage hike could prove devastating. Restaurants would have to find some way to absorb these new costs, and one option involves a five percent across-the-board increase in menu prices, thereby passing the cost of the president’s misguided policy along to the customer. Another option, of course, would be trimming staff – a solution the protesting workers would probably find less than desirable.

The welfare of these workers, however, is not the main concern of the SEIU and other unions when they agitate for a higher minimum wage and pressure their political allies to do the same. Union workers usually make more than the minimum wage to begin with, but often negotiate contracts so that an increase in the minimum wage would mandate an increase in the union wage as well. Higher union wages mean higher union dues, and more money naturally means more political clout for Big Labor bosses and more campaign dollars for their political allies.

A federally-mandated minimum wage increase would only further hinder our economy’s already-anemic growth, and would put more jobs at risk while only serving to enrich union bosses and the politicians they bankroll. American workers deserve better than that – they deserve a policy that’s fair to them.

Hector Barreto served as head of the Small Business Administration from 2001 to 2006 and is currently the Chairman of The Latino Coalition.