Minimum Wage Depresses Employment And Increases Pressure On The Low Skilled Worker

In a supposedly free nation, where is the sense in a government mandated minimum wage?

Now understand, I don't employ anyone. I have NEVER had an employee, nor do I ever foresee having an employee. I am also retired, so I'm not earning a wage. So I don't really have a dog in this fight.

But to me, the concept of a minimum wage is ludicrous.

Logic says to me that some bureaucrat in Washington or your state's Capitol saying that no job will pay less than $X will only hurt the low skill wage earner in the end. Yes, I know it makes the bleeding hearts feel good to take someone else's money and spread it around so those "unfortunates" will look kindly upon them come election time. I believe, in the long run a minimum wage doesn't help the low skill individual, but rather it actually makes their lot worse.

I'm certainly not trained in economics, but I can look at the world dispassionately and without an eye to buying votes. It seems to me that setting a minimum wage distorts the entire economy.

For example, if I'm running a business, for me to continue running it, I must turn a profit, not just break even. A charity can break even because at the end of the day no one is trying to put food on their table. A business, on the other hand, must turn a profit or the owner starves. Even a "progressive" should be able to see where that sort of an arrangement is somewhat self limiting and certainly removes any incentive for hard work.

So with the agreed upon need for the owner of the enterprise to earn a profit, let's think through what a minimum wage actually does.

Let's say you, the business owner, have two jobs. One job requires skills that only 20 percent of the population posses and another job that 98 percent of the population posses the skills for. For you to entice the worker with the higher skill level to work for you and not your competitor down the street you must pay $20 an hour, while the other job virtually anyone could do, you can get someone to do for $5 an hour. So at the close of business each day, you must have earned $200 JUST to have paid your employees. That doesn't cover the cost of materials, overhead, or you, the owner's needed income to survive.

Now enters the well intended "progressive" who says now you must pay EVERYONE a minimum of $15 an hour. Well, that automatically raised your required daily profit from $200 to $280 just to cover wages. But it doesn't end there. No! The value of your $20 an hour employee just took a concomitant leap as well. Their relative skill value just went from $20 an hour to $60 per hour. In order to keep them satisfied and not jump to someone who will pay them this much, your minimum profit per day has now gone to $600. But that is complicated by the fact that now, your materials cost has also gone up because your suppliers must also pay their employees 300 percent more than before. So now, small business owner, what do you have to do to generate this profit in order to put food on your table? Increase your sales price or increase your volume of sales significantly, of course.

Just generally speaking,what happens with sales as prices go up? Why, it decreases. But to keep prices the same, you don't have the staff, so you must hire more people which requires you to sell even more product to pay for them.

Are you starting to see the problem her Mr/Ms Progressive?

Now let's look at it from the low skill wage earner's perspective. Mr/Ms low skill worker is told by their "progressive" benefactors that they are no longer earning $5 or $7.50 an hour but now all jobs will pay them at least $15 an hour! Huzah! Huzah! Happy days are here!

Accept they are not. For those who were working and earning $5.00 an hour, they must look at their fellow workers and think, if they truly understand what's about to happen, which 2 out of the 3 of us will probably be let go now that the cost of doing business has just increased dramatically?

For those lucky enough to retain there jobs, they will now face increased pressures to be more productive in order for the business to remain profitable and continue to employ them. But not only will they face on the job pressures, but EVERYTHING in their life is now facing the exact same pressures and most likely a corresponding increase in cost. Any gain they may have seen through the increase in earnings will be eaten up by the following increase in costs.....of EVERYTHING!

For those poor souls with limited skill set value and no current job, they are now facing a market where employers are being ever more cautious about if and when they bring on such an employee. They seek alternatives to accomplishing these low skill functions. If you doubt this, I suggest you look at how many migrant jobs were replaced through mechanization after Cezar Chavez organized the migrant workers in Southern California. Machines became a viable option to paying low skill workers to perform the tasks. A one time $100,000 purchase of a piece of equipment versus a continuing rising cost of low skill employees was an easy decision. You see it happening in the fast food industry right now with self serve kiosks to order your food.

Not only are the unemployed facing a more dire employment picture, but they have also been hit with an increase in their daily costs for virtually everything.

So looking at the chain of events that logically proceeds from raising the minimum wage is a net net negative for the low skilled wage earner. The "progressive" who is oh so concerned with "social justice" has in fact made life worse for those with few marketable skills. If they were truly concerned for these folks well being, they would encourage them to take advantage of the schooling and training opportunities available to all in this country. They wouldn't be fomenting social strife that leads to nothing but ill feelings where none should exist.

Or so it would appear to an old farm boy.