By John F. Di Leo -
As cities contemplated doubling their minimum wage, conservatives warned that employers would flee. And that’s exactly what happened.
Then as states contemplated doubling their statewide minimum wage, conservatives warned them again; but again their warnings were drowned out in the cacophonies of popular liberalism. So now California companies are already collecting bids from moving companies, and ordering new stationery for new digs in Arizona, Nevada, and of course, Texas.
The destruction that minimum wage increases cause is no longer even denied by the left. Their politicians happily proudly admit the damage they do, even as they inflict these pains on an unsuspecting public.
Only Jerry Brown, known to the world as Governor Moonbeam, could come up with this tortured logic for signing such a disastrous bill: “So, economically, minimum wages may not make sense. But morally and socially and politically, they make every sense, because it binds the community together and makes sure parents can take care of their kids in a much more satisfactory way.”
So. Hurray for us, we’re binding ourselves together in unemployment as we happily drive the employers out of our state. Maybe we’ll feel good about ourselves as we starve our families to death.
The Minimum Wage in Real Life
Let’s say you have a hamburger shop. You analyze your non-labor costs – rent, utilities, ingredients, advertising, etc. – and you find that you have thirty dollars an hour to spend on salaries.
If there is no minimum wage, you might hire six people at $5/hour each, to put that $30 to ultimate effect. But if there is a minimum wage of $6, you must let one of them go, and employ only five at $6 each. If the minimum wage is raised to $10, you must let two more of them go, and employ only three. You still only have $30 to split up.
And when, finally, cities like Seattle and states like California raise their minimum wage to $15, you must let almost all of them go, and only employ two. (Just try not to think of what this will do to your sales volume, as substandard and flustered service costs you customers).
From our original six employees, four people have now had to be fired in order for politicians to be able to proudly say “we raised your minimum wage! Aren’t we terrific? Re-elect us!”
Telling the Truth
There are a lot of “dirty little secrets” in the minimum wage debate… uncomfortable truths that the Left simply does not want told. For example:
Mass Firings: Every honest study proves exactly what common sense would conclude anyway: If you force an employer to divide up his salary pie into larger pieces, there will end up being fewer pieces, so he must lay people off.
The minimum wage is therefore only a windfall for the employees who are kept on; it’s an economic death knell to the employees who are no longer worth employing at the higher rate, and must therefore be among those terminated.
Unspoken Triggers: What they never tell you is that tons of union jobs have clauses tying their own better-compensated employees’ wage increases to movements in the minimum wage. The public assumption is that a minimum wage increase only raises the salary of the cashier, the factory novice, and the janitor’s assistant… but in fact, every other unionized job will likely receive a proportional increase.
Yes, that’s why unions really support these increases (not out of some fanciful solidarity with the working poor, however the sycophant press may portray it)…. And it all sounds great for everybody, until those jobs flee the city or state as well.
Disproportionate Pain: There are businesses that don’t employ minimum wage jobs at all, or don’t employ many. Accounting firms, law firms, architects, medical practices… there are many white collar businesses that are not driven out of town by a minimum wage increase, simply because they don’t employ such low-level employees.
So, the businesses that are forced to either downsize or move away are the very ones that employ the most minimum wage jobs, the ones the neighborhood so desperately needs, to provide a career starting point to the poor, to the young, to the uneducated. By driving away the shops, fast food places, light manufacturing and distribution centers, society removes the first rung from the ladder that the next generation needs to get a start in their own respective careers.
Inflation: Pay people more, and they have more to spend. So prices in their area will go up. It should be news to no one that certain businesses boom on payday near a factory, or in a public housing community on the day that welfare checks arrive in the mail. Businesses plan price increases and sales to make the most of the rise and fall of liquidity in their clientele (think of the many retailers who offer April sales to “help” you spend your income tax refund).
It’s the same here: when the customers have more cash, their retailers will find a way to earn an increased share. The larger the scope (such as, a city versus a state, or even versus a country), the more prices will rise to meet the ability of their clientele to pay. Those of us who remember the 1970s will remember that such broad wage increases inevitably cause a vicious and destructive spiral of inflation.
The Imagined Slight of the Minimum Wage Job
It can be argued that of all the insults and offenses in the minimum wage debate, the most fundamental is the claim that “This person is worth MORE than $7.25/hour (the federal minimum wage at this writing).”
The Left then proceeds to display dozens of inspirational or pitiful examples of people who are obviously “worth” more than $7.25/hour – a student working two jobs to get through college, a single mother raising a roomful of youngsters, an accomplished adult whose better-paying factory was shut down, so he must now head a household on this impossibly low $7.25/hour. “It cannot be done,” shouts the television imagery, “surely you cannot be so heartless!”
We must expose the lie at the heart of this theme.
Nobody on the side of capitalism and freedom is saying an employee is only worth $7.25, and should not earn more…
Rather, we are saying the job is only worth $7.25, and it is a crime to force the employer to pay more for the job than the job is worth.
An employee is not a job. We must not confuse the two.
Some jobs are worth $7.25/hour. Others are worth $15/hour. Others are worth $50/hour. There are jobs in this economy that are worth a million dollars a year.
If anything, our goal should be to set these poorly-paid employees on the track toward one of those better ones, right? Even $15/hour, frankly, is a pittance compared to what we would like these employees to be able to earn at the peak of their careers, once they find the job for which they are best suited.
Nobody should ever stay at that minimum wage job forever, or even for long. The good employees, the productive and driven ones, normally move up quickly. If an employee is stuck at a minimum wage for long without promotion, the employee simply isn’t in the right job, and needs to hunt for a better fit!
What Should We Expect from Society?
Society cannot be expected to create a world in which every worker, regardless of skill or output, can earn a living wage. What society ought to be doing is trying to create a world in which there are so many options, in such a booming and prosperous “growth economy,” that every employee can eventually identify and obtain the job for which he or she will be able to, eventually, earn the most!
Think of some of the most famous people of recent history who attempted different careers than the ones for which they are famous:
Michael Jordan played both baseball and basketball; if he had only played baseball, he would never have been one of the most highly compensated athletes on earth, but he found his calling in basketball and broke records of every kind.
Peter Falk couldn’t make a living as a singer, but he found his calling as an actor and reached the pinnacle of that profession, being well-paid on both television and film.
Bob Newhart was an accountant, but that wasn’t where his key talents lay. His job as an accountant gave him material and a persona that led to a brilliant career as a stand-up comic and sitcom star.
A society that looks at a person and his apparent needs, and merely mandates a level of pay out of compassion, does that person no favors.
Our society was once a place in which each individual struggled to find not only a job but a career, not only a paycheck but a talent match, a way to be the best he or she could possibly be. And that is what our society needs to be again.
Because if you are the best at what you do, and it’s something valued by your neighbors, then you will do far better financially than any arbitrarily-set minimum wage could provide, no matter where we set it.
The Many Robberies in the Minimum Wage Debate
In fact, then, the minimum wage does its recipients no favors, and in truth, it does them demonstrable harm. The minimum wage is theft, both in the obvious ways and in many ways that are not nearly as obvious:
Stealing Jobs: Advocates of minimum wage hikes are knowingly, intentionally, putting people out of work. The bigger the hike, the more people will lose their jobs… and quicker. These politicians believe that the electoral support from those who keep their jobs and enjoy the increase will outweigh the loss of support from those who lose their jobs as a result.
And tragically, those who lose their jobs as a result almost never properly blame the politicians who did it to them… so these politicians turn out to have been correct in their cynical judgment.
Stealing Profits: Businesses exist to make profits for the owners. This is true whether it’s a small dry cleaning shop or a huge multinational conglomerate, whether it’s a business owned by a single owner or by a massive pool of stockholders. If you take the risk, you deserve the profit.
When the government forces that business to pay a certain salary level to its employees – not knowing the market or the region, not knowing the individual employees or the nature of the jobs – the government is robbing the business of those profits by making them pay more than a role is really worth… jeopardizing management and the owners of their rightful profits, which would themselves have otherwise contributed to the economy in spending, investment and tax revenues.
Stealing Opportunity: The primary purpose of entry level jobs is not to stay there or to earn that minimum wage salary; it’s to get a start in a career.
For any American, the first jobs are there to learn a skill or two, to develop workplace habits, to discover one’s own personal specialties, to gain entry into a profession and find out whether it’s a fit or not.
Increasing the minimum wage shuts people out of these opportunities, often forever. There are people who will never get a chance to find out if this career or that profession was a fit for them, because a company that could have afforded to give that person a try at $725/hour simply could not afford it at $15/hour. The higher this cost is, the more difficult it becomes for an employer to justify the gamble.
In addition, by driving these businesses out of the city, out of the state, or even out of the country, we not only rob the entry level employees of the opportunity, but in addition, we move away all those other higher jobs in the business. A manufacturing plant employs some entry level people on the line, sure… but it also employs supervisors and foremen, inside sales clerks and outside salesmen, buyers and accountants, engineers and upper management.
By driving away these entry level opportunities, we drive away all the higher ones in the business as well. And who does that help? Absolutely nobody.
Contrary to popular belief, the minimum wage is not just foolish and unhelpful, it is utterly destructive in every way, and on a grand scale. It robs people of their very future.
Copyright 2016 John F. Di Leo
John F. Di Leo is a Chicago-based Customs broker and international trade and transportation professional. He proudly recalls that his very first job paid a subminimum wage, paying enormous dividends by setting him on the track to his current career.
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