Minimum Wage Mistake

When the Democrats took control of congress, one of the first things that they did was to make substantial changes in the minimum wage.  I was surprised that it was accomplished without much opposition.  At the time, the economy was straining, but managing to maintain a minimal forward progress.  At least it seemed so to me, I am not an economist, at least not on the national scale. ( I know about personal finances and church budgets.)  I remember at the time hoping that it would not lead to economic troubles.  I was concerned for primarily three reasons.

1.  Companies that pay minimum wage to their employees would have a substantial percentage increase in their labor cost.  This increased cost would either be absorbed by decreased profits or passed along by increasing prices, or making cuts in other areas.  For companies that could not absorb the changes, there would be some closings.  So increasing the minimum wage would result in less profits, higher product cost and fewer jobs.  

2.  When the minimum wage is increased, everyone else that makes more than minimum wage does not automatically get an increase, so that where a person was making two dollars more per hour than the minimum wage, now, if their wage is not increased, their pay is no longer so favorable in comparison to the minimum wage.

3.  In raising the minimum wage, what has actually happened is that a basic hour of work which used to be valued at a certain price, now costs more.  What you have actually done, is lowered the value of the dollar.   It takes more dollars to get the same unit of work. 

I know that national economics are affected by much more than the minimum wage, but I thought that it was a mistake at the time and I have not seen anything to change my mind, it has only been reinforced.  As the next stages of raises are put into effect I believe that it will continue to negatively impact the economy. 

Is it too late to stop the next raises?

 

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3 Responses to “Minimum Wage Mistake”

  1. LisaB Says:

    Just out of curiosity, how long has it been since you worked for minimum wage and how much of your personal budget/finances were being supported by that wage? So, do you think the time and labor invested by the individual working for minimum wage isn’t worth a slightly higher wage that hasn’t been keeping pace with inflation, especially since factors all over the place are driving up costs of living even without the pressure put upon the companies by the minimum wage increase?

    It seems to me what companies have been doing to get around it is tightening up and changing their evaluation processes and qualifications for granting raises, so it’s not that the workers are getting less so much as they just can kiss good-bye their chances of being able to make much more unless they haul tail exceptionally in their current positions or have their job switched over to salaried positions which might look like a good garunteed deal, but it also means the company no longer has to pay anymore for any of the “overtime” it may require. It sets up the perfect excuse for the employer to demand more for less. It seems to me that’s in the “poor” employers’ favor.

    Some of it probably comes from higher prices and lower profits like you say including closings and layoffs, but you’re going to have a degree of that anyway. It just gives the companies another excuse to clean house like that in a way they were probably planning on doing eventually anyway, but were just trying to figure out how to get away with it.

    Also, they seem to just be upping the number of temp. and part-time positions and cutting out some full time positions so as not to have to pay for the benefits packages and such. They may have the people be there the same hours, but lunch is no longer paid and forget overtime.

    In that way the existing worker doesn’t necessarily get less, and the new jobseeker just has to decide whether he/she is willing to work for what’s offered. You have less people insured or getting sick days but you still have people taking home paychecks, it’s just some get to have their checks go just a smidge further. These days I wonder if the minimum wage checks are even enough to cover the gas it takes for the worker to get there. Not all companies have enough people living within walking distance of their businesses to be able to fill the minimum wage positions they have available. If it costs more for the worker to get there than he/she can take home, they’re not going to work there and then the employer just has to figure out something else (which no doubt involves cost) to entice their workforce to apply and stay there. Minimum wage positions are usually high turn around jobs anyway and that can be costly for a company to have to keep training new recruits.

    I doubt the little more the minimum wage earner is getting is going to be costing the majority of the companies as much as they’re gaining from the exploitations of the excuses raising a minimum wage can give them. There’re bound to be exceptions, but I doubt any company can afford to pay what any individual’s time and efforts are REALLY worth so you might as well let a few of the bottom of the totem pole workers get a little more for their contributions so they can have a few cents more to put toward their own cost of living. Give us, as a community, a little less that we’ll have to cover with our tax dollars in special aid programs designed to help make up the difference.

    Imagine making $6.50 for a part-time job that’s only four hours a night (not uncommon with part-time jobs to have that few hours and only offering minimum wage). You have earned $26 for the night. You live in a rural area where for whatever reason you don’t get hired locally so you use about 2 gallons of gas, round trip to get to and from work. Gas is $4.00/gallon (you know we’re headed toward that around here and some are well past that). You’re down to $18 for the night because you burned $8 of it on the 2 gallons of gas. Now you have to take out state and federal taxes even before you can get your gas money. How much does that leave you?

    Now, imagine if you’re full time, 40 hrs. You only start at $260 for the week. Subtract $40 for the gas (5 x $8) leaves you $220. You eat two meals a day costing about $4 each. Down to $164 ($4 x 2 x 7 because you still gotta eat on weekends). You got $40 coming out of your check each week for your insurance/benefits package. Down to $124. It’s about $5/week to come up with your car insurance bill for the month, $4/week for property taxes, $15/week for phone. Down to $100. We still haven’t taken out taxes, accounted for the added gas necessary for misc. driving (like to the grocery store). You’re already working full time. You can’t even afford an efficiency apartment on what’s left without some sort of aid and/or a roommate. If you get sick you have insurance to help, but you still have to come up with copay. You’re supposed to be tithing your ten percent in there too. Somewhere along the line the minimum wage had to be raised for you to be making that $6.50. Now some guy is implying that you shouldn’t be getting as much as that because it probably hurt the pocketbook of a company or some guy who somehow had more than you to begin with because you don’t have a business where you can afford to be hiring employees if you’re only making minimum wage yourself. Tell me, how does that make you feel? You know I’m not being extravagant or all inclusive with those figures either.

  2. LisaB Says:

    I don’t know why that smilie is there in that one spot. That was supposed to be 5 x 8 dollars. Not 5 x smilie. Sorry about that.

  3. cgirod Says:

    LisaB,

    Before I went into the Marine Corp I worked about twenty four hours a week at a job that paid barely over minimum wage. On that income, I tithed, had an apartment by myself, a car that I drove, and managed to meet my living expenses, all on about 65% of what a forty hour minimum wage job would have earned me.

    When I first came to DeWitt, the church paid me one hundred dollars a week. I supplemented that income by working part time at Casey’s. I was thirty years old with a college degree and worked for what Casey’s would pay me.

    Gloria, who is also a college graduate, worked at two part time jobs that actually paid less than minimum wage. (Apparently, there are ways that a company can actually pay less than minimum.)

    For most of my adult life I have worked two jobs. At this time, all four people in my family are working two jobs.

    I believe that budgets can be made to work.

    You can have a phone for less than fifteen dollars a week, or not have a phone at all.

    Our families current combined food budget, for both eating at home, and in restaurants, is about two dollars per person per meal. Actually, it is less than that, because our nonfood supplies come out of that figure as well.

    Live closer to work and save on gas.

    I have only once had a car that I made payments on, and that was when I was in the military. There are no montly payments and cheaper insurance.

    Earn more, or spend less.
    .
    However this post was not about budgets, but about the effect that raising the minimum wage has on the economy.

    My parents operated a small grocery store for over twenty years. They worked long hours and had part time employees so that the store could be open for more hours. Every time the minimum wage went up, they struggled to stay in business. There were years that the store showed little, or no profit, and sometimes losses.

    It is those countless small businesses like the one my parents used to own that are hurt the most by raising the minimum wage.

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