Have you ever noticed how after every election cycle when Democrats win they propose an increase in minimum wage? They call it a "Living Wage" increase like they're trying to help families supported by minimum wage holders. If only that were true. Their motives are a little different. One thing they will never admit is the real economic impact of the increase and its real results on the poor.
Let's start with the basic math. It wasn't all that long ago that the state of Illinois increased the minimum wage by two dollars over a two year period. For ease of calculation, let's use an increase of one dollar. It's an easy number to work with and I want it so simple a congressman can understand it.
We're going to use man-hours to figure the impact because it isn't dependent upon the number of people who work those hours. For example, a 40 man-hour week could be one person working full time or four part timers. I'm sure most of you know that, but again, simple enough for people who never had a real job to understand.
First the obvious; a one dollar an hour increase in minimum wage increases the cost for an employer of around $40 a week. Add 12% for employment taxes and another 2.5% for workman's comp (a good rate for retail or fast food) and you have a weekly increase of $45.80. That's not too bad, right? Surely anyone can afford to pay an extra forty-five bucks a week.
Okay, let's do more math since we know that people work more than one week a year. So, now we need to multiply that by 52 giving us $2,381.60 for one year. Still not too bad right? The problem is that it adds up quickly. Only the smallest of business can operate on forty hours a week of minimum wage employees.
Let's go to a typical minimum wage paying employer, a fast food restaurant. Most of them have around 25 to 30 employees making minimum wage. We'll use 30 for easy math and assume they work 20 hours a week each. That's essentially 15 people working 40 hours a week. When we multiply that earlier figure by 15, we get a much more significant sum of $35,724. All of a sudden, we have the wages of a full time person or three to four part time people. The math really adds up.
We do need to look at a larger employer. In this example, we'll examine a large retail store with close to 150 employees with approximately 120 of them making minimum wage. We'll make the same assumption we did for the fast food restaurant that they work 20 hours a week each giving us 60 equivalent full time employees. Now we're getting into real money. The cost for a large employer comes to a whopping $142,896. Holy jumpin' cats.
To recap, a typical fast food restaurant sees an increase of almost $36k for each dollar increase and a large retailer around $143k. This is a lot of money for businesses to absorb in a year. Most minimum wage employers operate on a relatively small profit margin relying on volume to make a profit. Even small cost increases impact the bottom line in very large ways.
Why do employers pay minimum wage? Because there are people who will work for it. It's just that simple. If a job requires more skill or education then it pays more. That's how the free market is supposed to work. If you do a good job, even at a minimum wage company, you get a raise. What happens when the minimum wage goes up with these people who make a little more but not as much as the increase? They go up to the minimum again. Most businesses do not increase wages across the board because they simply cannot afford to. This isn't a wage increase because the market demands it or because revenue improves. It's forced by an outside entity that doesn't care one whit about the real impact on the on the economy. When wages are forced to increase, everyone who has worked hard to do better loses their gains. That's incentive to work hard and be good at what you do.
This brings us to the economic impact and the effect on the people it purports to help. As I stated earlier, that money has to come from somewhere. There's only one of two ways for a business to handle the increase in cost. One, employ less people and cut hours for the ones you do keep. Have you ever noticed how the lines are getting longer at the local WalMart because there are fewer cashiers? There could be a reason. It's also why a lot of large retailers have added self-checkout lines. Customer convenience has nothing to do with it. It's all about cutting costs. Less hours, less people, and fewer new hires means that there's more unemployment and fewer entry level jobs available. They're helping! Really they are!
Sometimes cutting costs isn't enough. Staffing can only be cut so low before the business doesn't have enough people to operate. That triggers the other remedy for cost increases that are not dictated by the market forces which is to raise prices. That impacts all of us.
Wages in raw dollars really don't mean much from an economic perspective. What really matters is buying power. In other words, how much your wages can actually purchase. Wages are static in most cases in the rest of the working world when minimum wage goes up. When a business raises prices on their goods and services because of this government interference, the buying power of the rest of the population (that would be us) drops. We all receive a net effective pay cut. How's that for fun and helping?
Look, if a madman from Peoria can figure this out, surely someone out there has too. Heck, my oldest son at the age of 20 was able to figure it out when he was a crew leader at a fast food place. Why don't we hear about it? If this really doesn't help anyone, why do it? The answer is very simple. Someone benefits from the increase. It's not the poor, it's not the entry level worker, and it surely isn't the bulk of the middle class. Who is it?
Let's think about this for a minute. Everything a Democrat does benefits some group that helps keep them in power. The poor make up a large power base for them but we've already seen it hurts them. Of course, they believe the lie because there are no voices they trust telling them the truth. The lie is of some benefit of course but not enough to actually damage the economy for political benefit.
Who gets the dough? Unions. Plain and simple. Many unions, including the SEIU, have their wages tied to the minimum wage. It's a minimum wage plus a certain number of dollars based on seniority. So, every time minimum wage goes up, the unions get a pay raise. Can you say payoff? I knew you could.
Are you mad yet? Are you outraged? You should be. You get a pay cut every time the unions get a pay raise. If you protest, then you're labeled as being against the poor and working Americans. Never mind that only about 8% of the working population is actually helped by the increase and the rest of us working Americans get hurt. That just doesn't matter.
