Livable? Or Entry Level?

   Since President Obama’s state of the union address there has been a lot of talk over the raising of the minimum wage, and not just at the federal level.

    That’s right, once again, Delaware sees itself as the petri dish for the progressive ideas that come out of Washington. I am not sure if it is due to the fact that our vice-president is from Delaware, at least in years when there is no election, or if the Democrats in Delaware simply are without the intellectual prowess to come up with viable alternatives to the partisan rhetoric.

   So in the recent tradition of mimicking  D.C., Delaware has once again put forth a bill that would raise the state minimum wage from $7.25 an hour to $8.75 an hour, a similar bill failed to pass just last year, yet Democrat law maker Sen. Robert Marshall of  Wilmington, has decided that it is still a good idea, and has brought it back.

  There is already growing opposition to the bill from the small business community and other lobbying groups in the business community.

  Let me start with the argument for raising the minimum wage, it seems to boil down to,  that it is impossible to raise a family on $7.25 an hour. In his state of the union address, Pres. Obama even made this statement.

“Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line,” ,  “That’s wrong.”.

 Of course that’s wrong. Who would even think that you can raise two kids on $7.25 an hour, even if we are talking about two wage earners in the family. But the question remains, is the minimum wage intended to be a livable wage for a family of four? Or is it intended to be an entry level wage for new employees?

  It would seem that Pres. Obama and the Democrat lawmakers of Delaware see it as being a livable wage, and now seek to raise it to meet the needs of a family of four. They would also tie it to the inflation level, meaning that every time that inflation rises, so would the minimum wage. More on this a little later.

  The problem we are seeing in this discussion is the total disconect from reality in the business world, by the more progressive among our political leaders. They seem to think that you can raise the minimum wage, without raising the cost to employers, and in so doing, raise the cost to consumers.

  So let us consider that we raise the minimum wage for that family of four. For a short time they may see a small rise in their standard of living, but as the cost of goods and services go up, due to the raising of the minimum wage, their standard of living will again stagnate.

  Which brings us back to the idea of tieing the minimum wage increases to the rate of inflation. It would be a self fulfilling act, since raising the minimum wage would cause infaltion, thus triggering another wage increase and so on, and so on.

  So, are our progressive friends really this blind to the forces at work in the world of business? Or is there another reason they would be in favor of this idea?

  Let us face the truth here, our Democrat friends and the more progressive among us, are clearly more aligned with labor, and so more aligned with labor unions. The one group that will clearly benefit from a rise in the minimum wage, will be labor unions. The minimum wage is the bench mark by which all union contracts are negotiated, be they federal or state. If the minimum is higher, then the union wages will be higher. If the union wages are higher, then the union dues will be higher. If the union dues are higher, then the contibutions to the political candidates by the unions will be higher, historically a higher percentage to Democrats.

  Now of course the rank and file workers in the unions will be in the same boat as the minimum wage employees, they will see a small, short term improvement, but will again level off as the cost of living goes up due to the wage increases.

  Is it just me? Or does there always seem to be a backwardness to the thinking of the so called progressives?

  In these current economic times of businesses struggling to not only make a profit, but literally to survive, why would you increase the number one expence of any business? Wages! This on the heals of raisin the health care cost through Obama care.

  Also, in the current state of unemployment, why would you make it less likely that businesses will hire more people?

  Employment is nothing but an extention of the free market system. It is based on the idea of supply and demand. It should be cylindrical.

  If there are more people seeking jobs, than there are jobs, then the employer is able to pick and choose the best people, at the most favorable wage for his business.

 If, on the other hand, there is a limited number of people seeking  employment, and a glut of jobs, then the employer will need to pay more to entice the best people to work for them.

  However, as always, our progressive friends believe that government must be involved to make all things fair and even. When in reality, government will only skew the results in favor of government and a select few.

  In my view, raising the minimum wage will have many and far reaching negative effects on employment, on businesses of all sizes, on the cost of living as well as any number of peripheral issues.

  If the minimum wage is raised I believe we will see employers hiring fewer people. The jobs that are minimum wage jobs will now go to older more experienced wage earners,  knocking the student employees out of the job market all together.

 We will see more jobs being moved over seas as the cost of labor across the board goes up due to this increase, creating even more unemployed here at home.

  As the cost of goods and services go up due to this increase, we will see more people turning to government assistance.

 The bottom line is, wages should be merit based and negotiated between the employee and the employer, be they union or non-union jobs. The government should not be involved. By artificially setting the rate of wages the government is able to put a burden upon employers that they may not be able to absorb based on the current market for their goods or services.

 A minimum wage was never ment to be a so-called “livable wage”. It was ment for new hires and part time jobs. It was intended for students with summer jobs. And yes it was ment to protect people from slave driving employers who would somehow force you to work for them for less than you wanted to. (That was sarcasm).

 I would ask my progressive friends, why stop at $8.75 0r $9.00 an hour? Neither of these will support a family of four. Why not go to $10.00 or $15.00, hell why not $20.00 0r $25.00?

  Better yet, let us stop all of this playing around with hourly wages at all? Why not set yearly minimum wages at $50,000.00 a year? No, better yet, set the yearly wage at $249,999.99, that way we will be one penny under the arbitrary number that our progressive friends see as being the evil rich people.

 This is but the latest backward thinking of the progressive mind, much like the idea that you can raise taxes on the so called rich without affecting everyone.

 That you can keep increasing spending and still lower the deficit and debt.

 But mostly, both at the federal and state level, this is but the latest pandering to the uninformed citizen. It is yet another attempt to buy votes. I urge our more conservative political leaders to resist the temptation to go along with this.




3 Comments on "Livable? Or Entry Level?"

  1. kavips says:

    There are a couple of problems with your interpretation. Allow me to illuminate some of them…

    First, raising the minimum wage is always one of “degree”… Raising the minimum wage $.50 cents an hour may be acceptable, but paying everyone $50,000 is not…

    The retired Pope Benedict offered a very interesting perspective on the place of unions in a capitalistic world… I’ll paraphrase….

    People have to eat, he said. This gives employers an unfair advantage in setting wages. the negotiation is one way… work for a dollar or don’t work,… The employee’s answer depends on how hungry that person is…. The employer knows, if he waits long enough, he can always find someone hungry to do the work. He also knows he could just as easily find someone who would work for even an additional $.50 cents less an hour as well.

    The only recourse the worker has, the former Pope said, is to unionize and say: we aren’t working unless this amount gets paid…. Without this recourse, wages drop into the bucket…

    So if we did away with the minimum wage, and we very easily could if we mandated all people under $15,00 an hour had to be members of a union, they could then strike whenever they thought they weren’t earning enough, and government interfering with business would never happen, and the problem would simply fix itself…… However, the disruption to employers and the economy is far less I’d believe, if we just go ahead and raise the minimum wage….

    If you raise the minimum wage 50 cents and during your peak hour you employee 10 people, your incremental cost is going to be $5 dollars…

    So in a $1000 dollar sales hour, is $5 dollars going to make you close your business? And that is with 10 people. Those with one person complaining over minimum wage saying they can’t afford more?… really? 50 cents you can’t afford?

    So let’s make this scary and figure out how we survive if the wage soars to $10,00 and hour….

    Ten people per hour would increase that hourly payroll cost $27.50…. If you are running 10 people, your productivity is probably close to $100 per employee which means your hourly gross income is close to $1000 dollars.

    That hour your labor will be 2.75 % higher…. Which on a very tight margin, means you would have to raise prices…. How much?

    You will need $ 1379 to maintain the same hourly percentage you had before… If you wish to to that, you will implement a 38% increase on your prices….

    Your dollar items, will be $1.38. Your $2 items, will be $2.76. … and $10 dollars will climb up to $13.79….

    From your customer’s point of view, it is no different than having an item go off special from the last time. Only a few will even notice…..

    So now, you the business owner are raking in an extra $379 dollars every hour, and paying out $27.50. Your labor percentage is exactly the same as before. But your fixed costs, your utilities, your product costs, did not rise…

    So your decision, is making you directly $351.50 more than you were those busy hours before minimum wage rose….

    So, obviously you don’t need to raise your rates that high. since the higher percentage of labor, is completely offset by over ten times the lower percentages the other costs with cost you… if you truly were happy just making the exact same dollars which you were prior to the increase in minimum wage, you would only have to raise your prices 2.75 % in order to gain an extra $27.50 each $1000 hour…. A dollar item would now cost $1.03…. a two dollar item $2.06.

    This is the true pittance of minimum wage… Not the horror stories of… oh my gosh… i can’t afford two dollars and seventy five cents an hour for all my employees… I might as well close down!

    Really? Close down instead of a 3 per cent price increase per dollar?

    Look, since you stand to lose absolutely everything you put into the business because you are threatening to close it down if minimum wage goes through… why not sell it to me for 10 cents on the dollar? It’s more than you would have made if you close down… A lot more….

    Smart business owners know that with an increase in minimum wage, their customers will not care if they can raise prices. They know higher prices makes more profit. Smart businesses see raising the minimum wage as good business….

    So if raising the minimum wage to $10,00 an hour is ho-hum…. how much less dramatic will be the impact of a $9.50 or a $9.00 level be?

  2. Frank Knotts says:

    Kavips, you are speaking of one business, in one hour. Now multiply that over thousands of businesses at forty hours. What is the impact to the over-all economy? As for unions? We have seen the impact of being to strike for more money. We get workers who feel they can’t be fired and so some do not work as hard, they demand pensions that companies can’t afford to pay and continue to grow. We see companies leaving the country to go where the labor is cheaper and they don’t have to deal with unions. So how exactly does that benefit either the workers or the consumers?
    But for me the bottom line is, why should the government be involved in picking winners or losers in a private contract between employers and employees?
    I have no union at my job and I work for much more than minimum wage, not because the government forces my employer to pay me more, but because I work hard and make myself an asset to the company. When I started at the same company 32 years ago I worked for minimum wage, it is meant to be an entry level wage, not a guarantee of the good life. We as Americans have lost the ideal of working hard for that which we want.

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