So, I'm sure everyone has their opinion on the president's SOTU address, and I'm sure mine falls into one of those many categories. Before I go tearing into the president, let me first reassure you that I identify neither as a Republican nor as a Democrat, and I do not identify as a Conservative nor as a Liberal. I identify as an individual with a brain and an opinion.

Now, that being said, let's go.

I would assume that anybody who has a business-related degree has taken a course in Economics. Which economics course it is has no bearing on your understanding of the following, because if my mind serves me correct, the same principle was applied in both Micro and Macro.

Basic economic studies would tell you that the president's plan to boost the federal minimum wage to $9 per hour is a bad idea for a number of reasons, and the largest reason is inflation. Consider this. You are a small business owner and all of a sudden Congress goes along with this stupid idea. You find yourself ponying up an additional $2 an hour per employee. That's an additional $16 per day (for a full-timer) or an additional $80 per week. For the year, you are now paying $4,160 per year extra per employee. But wait. What's that you say? You have 50 employees?

Yes. The government has basically forced you into paying an additional $208,000 per year. So, from where does this money come? You guessed it. The consumer's pocket. Small employers can do one of two things. First, they could simply pass that added cost on to the consumer in the form of higher-priced goods and services. Raising prices to cover overhead is tricky because sometimes if margins are already high enough, it can cover the added overhead. But, for those companies in a highly-competitive market, this could seriously hurt the company in the form of sales lost to competitors.

The second way they can combat this overhead is to simply hire less employees. However, this also has serious implications in consumer service. For example, restaurants would most likely cut non-essential employees first like hosts and hostesses, probably followed by wait staff. Sure, Jimmy can handle 12 tables instead of 10. The result? Consumers take their business somewhere else and soon that small business is simply OUT of business. That's no fun.

How does inflation tie into all of this? Look at supply and demand. These two terms are directly related. If demand increases, supply must also increase. If supply decreases, so does demand. Why does this happen? Take gasoline for an example. When supply is high, the price comes down. At a lower cost, it is easier to afford and demand slowly starts to trickle up to consume the surplus. As demand increases so does price. Once price peaks, demand starts to recede. See a pattern?

So what would increasing the minimum wage mean? This means that more people have more purchasing power, which of course would increase consumer spending. I don't dispute that part of the president's equation, obviously. It'll be good at first for the economy, but eventually demand will increase and so will prices. With what Obama has shown us in the past, his response to increases in prices will be simply this: another wage hike. What next, to $12 per hour? $15? When does it stop?

I'm going to allow commenting on this, but please keep it friendly. I'd like genuine thought-provoking conversation, and none of that one-side-bashing-another crap. :)