The Democrats want to raise the minimum wage to $15 per hour. Rep. Rashida Tlaib (D-Mich.) told “attendees at a One Fair Wage event that the federal minimum wage should actually be $20 per hour, not $15 as is currently being pushed by the Democratic Party.” Because governments pass laws that employers must pay a minimum salary, people with lower skills can’t compete for jobs by offering to do the job for less in order to acquire skills and experience.
What will happen to the people already making $15 and $20 per hour? They will demand a higher wage since their skill level and experience are the reason they are making a higher wage. In time, economic equilibrium will settle in and we’ll be back at the starting gate. Wages will be higher, and so will prices for everything.
Forcing a minimum wage on companies is economic tyranny. Think about it. The government is forcing employers to pay people a certain amount of money whether what that person does for a company is worth $15.00 per hour. Forcing employers to pay a minimum wage sounds good politically, but it does not make either moral or economic sense.
When the minimum wage goes up, union wages and benefits also go up. That’s why unions are always behind an increase in the minimum wage. Unions can hold businesses hostage to force up wages, so they want new contracts to reflect a “proper” wage-distance from the meager minimum wage earner.
Higher wages also mean higher prices. Not only will employers have to pay $15 per hour, but Social Security and Medicare costs will also go up for the employer because of the increase. Remember that an employer pays the same amount of Social Security and Medicare “contribution” that an employee pays. In addition, the states and the Federal government will get more tax revenue since the increase in pay will mean more money to tax and spend.
Is it any wonder that former California Governor Brown was quoted as saying that “economically, minimum wages may not make sense.” So why did he sign a new minimum wage law? Because it makes political sense in states like California and New York. It’s not about the fundamental principles of economics; it’s about the overreach of government and further control of commerce.
Gains made in wages will be passed on to prices for goods and services. In time, everyone will be back to where they started. Market conditions, demand for goods and services, and the state of the economy determine wages and prices. Of course, employers are always looking for ways to cut costs, but in the end, in order to stay in business, they strive to hire the most skilled workers at the forced higher wage.
Employers who hire minimum wage workers are usually working on small profit margins. If they get hit with something like a 25 or 50 percent increase in the minimum wage, it’s possible that to make up for the additional labor cost, an employer may lay off a fourth of his workers and distribute the work to the remaining employees. Unlike our government, businesses can’t print money.
This is exactly what Bernie Sanders had to do when he got caught not paying his campaign workers the promised $15 per hour wage. Economic really hit:
Democrat presidential candidate Bernie Sanders announced this weekend he will cut staffers’ hours so that they can effectively be paid a $15-an-hour minimum wage, prompting mockery from critics who say the move is more evidence that Sanders’ plan to raise the national minimum wage is hypocritical and would only lead to less work and more unemployment.
Sanders, being a government employee all his life, doesn’t know the reality of what it takes to run a business. Business owners know.
“First, you have to raise prices, otherwise you’ll be out of business,” owner Selwyn Yosslowitz [of Marmalade Café] told the Times. So higher prices for diners. That’s “first.” We imagine you can guess what’s “second.” “We will try to re-engineer the labor force,” Yosslowitz said. “Maybe try to reduce the number of busboys and ask servers to bus tables.” In other words: “Maybe’ we’ll fire some folks and the people who keep their jobs will have to be more efficient.” (Source)
Inexperienced young people are the first to suffer when the minimum wage goes up. For the unemployed, the minimum wage is $0.
It used to be that when two people competed for the same job (skill levels being equal), a person who could undercut the amount an employer was willing to pay often would get the job.
An employer could take a risk on someone who lacked experience because he didn’t have to pay him what an experienced worker might demand. Many of the jobs available to teens were low skilled anyway.
By making it illegal to pay someone less than a government-mandated minimum wage, those with less experience are at a disadvantage. Employing teenagers is now a classic Catch-22 dilemma.
“Do you have experience?,” the shop owner asks.
The teenager is honest and shows initiative by answering, “No, but I’m willing to work at a lower wage to gain experience.”
“Sorry,” the shop owner says. “I would be breaking the law if I hired you for any amount less than the minimum wage. I can hire someone with experience at the same wage I’d have to pay you.”
“But I can’t get experience if you won’t hire me.”
“Tough luck. Complain to your newly elected socialist congresswoman.”
Brian Levine, co-owner of Tropical Smoothie Café knows the law and the logic of the marketplace:
A lot of it comes down to what we can afford, versus the hours they’re available to work. We are more or less the minimum-wage-type of place. I would obviously prefer to pay minimum wage, but I’d also go for an adult and pay them an extra dollar an hour. They’re available, have more experience and are quicker to train.
Renee Ward, the founder of the job posting site Teens4Hire.org, offers a similar story. “If you have two candidates for a job, and one has experience and will take $10 an hour, and the other is a teen with no experience, who do you think would get the job? When jobs aren’t there for anyone, it’s that much harder.”
Once again, governments are the problem not the solution to job and wage growth.
You might respond, “Sure, you can say this because you make a lot of money.” I don’t know what a lot of money is, but I sure make more than I did at my first job — $50 a week to wash pots and pans at a country club. Do the math. It was a little more than a dollar an hour.
I worked a New Year’s Eve party at a restaurant when I was 16 with no hourly wage. The only money I got was in tips. The no-wage guarantee made me work very hard to get good tips. I made $20 for three hours of work. That was in 1966. That was big bucks back then.
I worked in the produce department at Kroger after school, weekends, and during the Summer. This experience enabled me to get a job in Florida when the economy was soft. When I went in to apply, the manager told me that they were not hiring. I then said, “But I have experience.” I ended up working 60 hours a week. There was no union. My hard work was noticed, and I was offered the assistant manager’s job at a new store the company was opening.
It was these types of jobs and disgusting working conditions that incentivized me to do better. I gained work experience and references. I worked through high school, had two jobs in college, and worked my way through graduate school as a custodian and assistant bookstore manager.
Get the government out of the minimum wage business and you’ll see the economy grow, prices fall, and wages that will keep up with expenses. The best workers will get the best jobs at the best prices.
Also, cut every government program that is not constitutional and keep lowering taxes. Make the Federal Government nearly irrelevant.