Opposing the Minimum Wage Based on Reality

Math. Pesky math. Somehow it always wins, in spite of the dogged persistence of some activists and politicians to get it to go away. History too. History is a constant annoyance to those who wish to promote their version of fantasy where things do exactly the opposite of what they actually do in reality.

Minimum wages are counterproductive in solving the problems they purport to solve. Increases in the minimum wages do not work either – in fact, a market driven economy will usually raise starting wages for many businesses long before the minimum wage is increased.

Since Wal-Mart and McDonalds seem to be the stereotypical businesses to bash where minimum wage is concerned, we will use them to represent all businesses. Because they all have to work on the same principles.

Wal-Mart does NOT in fact pay minimum wage, they typically pay at least a little more, and quite a bit more in some areas where there are employee shortages. But we will use Wal-Mart anyway, just because they will be affected along with everyone else.

WalMart occupies a specific niche in the retail world. To be able to keep their prices low, and still maintain a profit margin, they operate on low margins. Their profit margin is ALSO LOW, so don’t go around saying they have plenty to spare and they can absorb the cost of doubling their employee salaries, because they can’t. Their profit margin won’t cover that, the MATH does not add up, and in order for ANY business to stay OPERATING, the math HAS to work.

Cost increases of 25% across ALL areas of their operating expenses CANNOT be absorbed by a 1-2% profit margin. Yeah. Math. CAN’T HAPPEN!

One of the ways they keep prices low is to use loopholes in regulations to keep the cost of regulation lower. Part-time employment is one of the ways they do that, because the law requires benefits for full time employees, but not part time. (This concept applies to mandated benefits like Obamacare also.)

Fast Food and other minimum wage employers do the same thing. WalMart typically pays just a little higher than minimum wage for entry level employees – and everyone who has been there for a while GETS MORE (and they have to, or they won’t stay). In order to stay in business that is what they have to do. Seven years ago, they had more full time employees. The regulatory burden for employers increased at that time, along with a dramatic jump in health care benefit costs. Many of their stores dropped to part-time only at that time (previously most had a set amount of full time and part time positions per store).

There’s a trade-off in going to all part time – the cost of training employees increases dramatically, because there are both more employees to train, and because part time workers have a higher turnover rate – so the ONLY reason an employer will absorb that cost is when the cost of full time employees becomes so high that it is more cost effective to pay the cost of repeated training.

The cost of goods dramatically increases every time mandated increases in the cost of doing business are put in place also. It can’t NOT happen that way.

When the cost of hiring and paying workers increases, YOUR cost at the checkout GOES UP. (This is pretty basic math, by the way, but there are still people who are shocked by this.)

This is how business works – every time the government regulates a change that drives up the cost of doing business, the customers and the employees pay that price. Employers do not even TRY to absorb that cost, because they CANNOT and still stay in business.

The cost of the average full meal at a fast food restaurant will run approximately the same as the current minimum wage, or higher. They may have frugal deals that are lower, but the regular price runs on that rule. Every time the minimum wage increases, the cost of a full meal deal goes UP proportionately. Because the business does not have to absorb ONE cost increase, they have to absorb a cost increase in EVERY ASPECT of business.

They do not plan for the cost of the meal to keep lock step with minimum wage, it just does because that is what it COSTS. Once the affect of wage increases filter down through every layer (and it takes 1-2 years for the full effect of EVERY increase to be felt, which is why governments like to obscure it by incremental increases), the cost of your full fast food meal is predominantly dependent upon the cost of labor at all levels of production.

Stay with me here, because this is where liberals like to let their eyes glaze over and pretend this stuff does not matter. IT MATTERS… This is BASIC MATH, people!

When the cost of labor goes up, it goes up everywhere, for more than just minimum wage. It has to.

The bottom wage increases, and you HAVE to increase ALL THE OTHER wages also, because if you do not, it is NOT FAIR to employees who have worked three, five, and twenty years for your company. It is INHERENTLY UNFAIR to pay an entry level, unskilled worker (which is what minimum wage pays for, and ONLY what minimum wage pays for!) the same wage as someone who has skills, and work experience!

You have to increase ALL SALARIES.

And when the cost of the farmer’s food, seed, equipment, and employees goes up, he charges more for his crops (or he goes under – that happens a lot too, so you have to buy from someone who DID raise their prices), and the cost of transporting that food goes up, and the cost of trimming, washing, packaging it goes up, and the cost of warehousing it, labeling it, and distributing it goes up, and the cost of buying it in your local store does not just go up by the cost of THEIR employee raises, but by the cost of every other employee raise along the way because EVERY COST they have, goes UP.

Within 6 months, the affect of the raise in minimum wage is nullified by increased costs, they STILL cannot afford to live any better than they did two years before, but now they are in a higher income bracket, and may not qualify for some services that they qualified for previously. Within 2 years, the full effect of the increases are completed, and the worker is WORSE off than before!

Did you get that? Did you really understand this? Because if you did not, you are too ignorant to vote! This is critical to understand!

When the cost of minimum wage goes UP, the cost of groceries, utilities, transporation, medical care, housing, and EVERY OTHER COST for BASIC LIVING, goes UP, by AT LEAST the SAME PERCENTAGE, often MORE! So this new salary, that suddenly seems like so much, WON’T BUY ANY MORE THAN THE OLD ONE! It evaporates away under an onslaught of higher prices, and the person that the law was supposed to “help” still struggles just as much!

It is also VITAL that you understand, that the ONLY people making minimum wage, are people who have been on the job less than 6 months, and who have just started a new job that requires NO SKILLS!

Within 6 months, they are no longer making minimum wage. Within 1 year they can get a job somewhere that pays a $1 more per hour than where they are now. If they are smart, and gain SKILLS (either through work experience at a job that provides useful work experience), or through seeking after hours training, there is NO NEED for them to ever work another job that pays minimum wage! THEY control their OWN destiny and their OWN ability to GET OUT OF THE HOLE.

The only people who work minimum wage for more than 6 months of their life are those who REFUSE to better themselves, and are incapable of holding a job for more than 6 months! That is their CHOICE, and the world does not owe them a better rate of pay!

And that is why people who understand math, and people who can THINK rationally, oppose a minimum wage in the first place, and always argue against increases.

All it does is increase costs for everyone. Including YOU who voted for it!

Increases in minimum wage DOES cause a loss of sales for some businesses. Temporary for some, permanent for others.

Where people have a CHOICE, they switch to a lower cost option.

Where they have no choice, they either do without (if it is an optional expense), or find a way to cope if it is not.

So some businesses will lose revenue over it. Some will go out of business over the cost increases, ESPECIALLY when a minimum wage increase is only local, and buyers can go elsewhere to get what they want at a lower price.

Increases in minimum wages ALWAYS cause some job loss. Some of it will recover in time, some will not. So those people who are working minimum wage jobs not only face more of them being cut to part time (so the employer can save on benefit costs), they also face potential closure of their business, or lay-offs due to reduced customer demand for an overpriced product.

Here is the great irony in that….

The FIRST PEOPLE TO BE LAID OFF, are those who are paid MINIMUM WAGE! Because they are the MOST EXPENDABLE employees!

They are the employees who are most recently hired, who have the LEAST SKILLS.

Some businesses will lay off employees and downsize in reaction to minimum wage increases, in order to cut employment costs, but the majority don’t, because it is a dead end to do that unless your sales also decrease. The successful businesses do not lay off employees and downsize (other than making sure all employees are actually vital), because they understand that loss of employees means loss of revenue due to lower production. The only time you cut employees is when you want to reduce production, as a result of loss of sales. The big businesses will simply raise prices and adjust their equations across the board, and go on, as well as implementing other strategies such as higher percentages of part time employees and lower starting wages for businesses that USED to pay more than minimum wage.

Businesses that try to absorb the cost, go out of business. Universally. The costs are TOO BIG to be absorbed. Fewer Jobs. More hungry people. Way to go!

Minimum wage laws HURT EVERYBODY, but they hurt the people they claim to help MORE than they hurt anyone else. Any potential benefit is always so short lived as to be useless in the long term, and MOST businesses that understand MATH, will raise their prices right BEFORE the hikes go into effect, so there is INCREASED financial hardship before the wage increase even occurs.

BTW, history shows that everything stated here is correct. If minimum wages actually worked, the problems they are supposed to solve WOULD BE SOLVED! But instead as soon as the rate is raised, there is a general outcry to raise them again!

Do the math! There is no way the REAL math can be interpreted to support minimum wage increases.