Minimum Wage

Posted on Tue 07/08/2014 by

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Lineal thought  ~

By T. L. Jenkins   ~

  I’m not an economists but believe I have a reasonable enough understanding of supply and demand, the basis of our free enterprise system, to have a strong opinion about Government mandated minimum wage, and to believe it’s a bad idea. I also believe our U.S. Constitution does not give the Federal Government the purview to mandate a minimum wage. Some would argue “to provide for the general welfare” gives the Feds that right, but that is a whole other discussion. Suffice it to say there are many who believe otherwise and I fall into that group. That aside, a mandated minimum wage is still a bad idea.

Though we know most readers will understand to a much higher degree, let’s put things in the simplest possible terms for those who may not (it seems likely most liberals have no grasp of free enterprise as they are so adamantly in favor of minimum wage, so this is probably mostly for them) to explain the free enterprise system we live in and have prospered under for over two hundred years.

For one, a minimum wage law fuels inflation. It’s Government (and minimum wage earners) chasing their tails. In 1955 the Federal minimum wage was $ 0.75 an hour. (www.infoplease.com/ipa/A0774473.h) In 1965 it was $1.25/hr. In 1975 it was $2.10/hr. In 1985 it was $3.25/hr. In 1995, the minimum wage was $4.25 an hour….On and on.

Wages—i. e. the cost of labor, is driven by supply and demand but also the need of workers to make a living and the need of business to have a work force. If a business is not willing to pay it’s workers a reasonable weeks pay, that business will have no workers. A Government mandated minimum wage therefore, is not required. At the same time, a business has to compete with it’s competition for those workers so it may entice those workers with higher pay, extra vacations, even daycare for children so Mom and Dad can come to work for the business. A minimum wage law is completely unnecessary for that reason.

Minimum wage drives inflation in these ways. A business whose cost of labor goes up, in most cases has to raise prices in order to stay in business. A business of course can raise prices any time it feels like it—only it can’t because it has to compete with other similar businesses, but when similar businesses also see their costs of labor going up with an increase in the minimum wage they also have to raise their prices, thus the first business has stayed competitive.

Now, those workers who were already making more than minimum wage may find themselves suddenly making minimum wage, an entry level pay, or closer to minimum wage than they had been. All businesses, even those who may have had no minimum wage employees may find they now do have minimum wage employees, and find themselves in a position to have to raise their own workers pay also or risk losing them. Having had to raise those workers pay, it also finds it has to raise the pay of the next level employees and the employees above them etcetera. That sounds great—everyone has more money! (Liberals applaud) But that is a tremendous cost to the business and prices must rise accordingly.

Add to that, since everybody’s pay went up there is more money in the economy fueling inflation further….Here’s how that works : If all workers suddenly found $100.00 more in their pay-check every week (very few would save it) they’d also suddenly rush out and buy all sorts of things, causing all sorts of those things to disappear from store shelves. The law of supply and demand dictates since more people are competing for the products on the shelves, prices naturally rise.

You only have to imagine yourself as the seller of say, a particular brand of shirt : You’ve had a hard time selling the shirts, so you’d keep the price as low as possible to entice people to buy your product—wouldn’t you? You’d still want to make money (profit) (a dirty word to a liberal) from the sale of your shirts, so you couldn’t “give” them away. (Sorry liberals, no free stuff)

But wait! Suddenly everyone has more money and wants one of your shirts! You can’t keep up with the demand so some people offer you MORE for your shirt so, you raise the price. (Wouldn’t you?) After all, that’s why you’re in business in the first place—to make money to support yourself and your family. Right? If even more people are clamoring for your shirt you raise the price again—and maybe again after that as long as people are buying your shirt, until somewhere down the road demand levels off and you stop raising prices and maybe even drop the price a bit to entice people to continue to buy your shirt.

So not only did you HAVE to raise prices because a minimum wage law forced you to pay more for your labor, since there was more money to be spent by your employees and others, the demand for your product went up and again you raised prices accordingly. Inflation! The end result being the bottom tier of workers end up right where they were to begin with, having to pay more for your shirt with their new found “wealth.” All the other businesses went through the same thing you did, so prices everywhere are higher and everyone who thought they got a raise really didn’t—they were just chasing their tail.

That wouldn’t be totally bad if our country was a closed system—but it’s not. We now live in a global economy where business, very possibly the business you work for, has to compete with other countries. If your company can’t compete because it’s cost of labor has gone up forcing it to raise the price of it’s product, it goes out of business when a competing company in another country has not had it’s labor costs go up—and you are out of a job! So many of our manufacturing jobs have already moved to other countries because the cost of labor there so so much lower. Minimum wage contributes to the spiral putting you and others out of work.

If you think because you don’t work in a manufacturing job that your job is safe—think again. Look around at former manufacturing towns who’ve lost their factory (s) to some other country. The people who work in clothing stores selling the aforementioned shirt, restaurants, bars, drug stores, hardware stores, auto dealers, even police and firefighters all lost their jobs as well because the people who used to work in the factory are no longer there to spend their money in those other places and also not there to be protected by police—or to pay taxes to pay police or maintain roads. Construction jobs are lost because no new houses are being built. In other words, the whole town has gone to hell.

Just as when you go to work you are not working to do your boss any favors but are there to make a living for yourself and your family, so also your boss has not hired you to do you any favors. You perform a service for which you expect him to give you money. He expects you to perform a service for which he gives you money, and it’s only natural he’s only going to pay the least he can get away with, that is; what you’re willing to work for..

His aim is to make a living for himself and his family also. Chances are your boss has invested and risked his life’s savings and put in many hard hours to sustain the business, all the while sweating he won’t lose his shirt. Now he has become successful enough to hire you. This is true even for the huge corporations one might work for. At sometime in the past that huge corporation began with someone’s hard work. Henry Ford did not start Ford Motor Co. with thousands of people working for him. He started with a lot of hard work and worry as to whether he’d lose his shirt. The result of his hard work all these years later is many thousands of people have work to support themselves and their families and Mr. Ford was justly rewarded.

His aim was not to supply all those people with jobs. His aim was to make a living for himself and his family. He hired people that were willing to work for what he was willing to pay. If he had not offered the pay he did, he would not have had a work force and there’d not be a Ford Motor Co. today. This applies today as it always has. Any job, even a dishwasher’s job would not be worth having and could not attract even the most unskilled worker without offering enough pay to make it worthwhile. That makes a Government mandated minimum wage unnecessary.

It’s almost a sure bet, the local hamburger joint in your town or state pays more or less than the next town or state. A local ‘burger franchise we know of, located in a nearby town whose residents were mostly high income, paid it’s teenage employees several more dollars per hour than another of the same franchise in another town, because it couldn’t find enough workers to work for the pay usually offered at such places……That’s supply and demand. That’s free enterprise.

Do you try to make as much money as you possibly can? The answer is probably yes. Whether one happens to be a worker, supervisor, boss, or owner of the business—all strive to make money to the limit of their abilities. Money is the means to have a place to live, something to eat, and have what we need to live and play. Even a die-hard liberal wants to make as much money as possible. One major difference though, is a liberal resents others making more than him and resents people like Henry Ford for that reason. A liberal thinks he should make that much money also but doesn’t grasp the concept of hard work to get there.

Do you strive for a raise in pay in your job, and if given a raise, would you be happy? Again, the answers are probably yes. An employer gives raises to keep his workers, otherwise he’d be constantly training new employees.

Would you work for no pay? We can guess : Of course not. Would you accept a job for $1.00 an hour? How about $2.00 an hour? Again, we can guess the answer is probably “No.” Both you and your employer know other employers are offering more to work for them. If one company were to offer $2.00 / hr. and the next were to offer $10.00 / hr. it doesn’t take a rocket scientist to see who everyone would work for. The person or company you work for has to compete with other businesses to obtain your services whether you are a dish washer or CEO. A government mandated minimum wage is not necessary.

Do you think an employer offering $1.00 an hour would get anyone to work for him? We doubt an employer could find any employees willing to work for $1.00 an hour. But we know an employer will offer the lowest pay possible to still entice an employee to work for him. (what the market will bear) We know though, if he didn’t pay enough he would have no one to work in his business.

We bet if you owned a business, you would not be willing to pay that kid flipping burgers $1,000.00 an hour. You couldn’t afford to pay $1,000.00 an hour to your employees. You’d go out of business and everyone who worked for you would be out of a job. The exaggeration should make the point you could only pay enough not to be put out of business. At the same time, if you owned a business you wouldn’t pay someone $20.00/hr. if they were willing to work for $10.00/hr.—would you? But if that worker turned out to be a very good worker you might be willing to pay that $20.00/hr. to keep that worker (if you could afford it.)

Minimum wage should be abolished. If it were, it’s almost a certainty not one worker’s pay would go down from where it is at present and if “minimum wage” should go up, it’s almost a certainty the cost of everything goes up with it, and more jobs—maybe yours, will be lost to some company overseas whose labor costs didn’t go up.

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