Ok, so in yesterday’s post I asked what you thought about the State of the Union address, as well as what your “State of the Union” looked like. It sparked a lot of great comments.
One series of comments was about the increase to $9.00 minimum wage. So, as business people, I would love to see what your thoughts, the thoughts of the people who it would actually affect, are on that proposed increase.
- Do you think it will help or hurt our economy?
- Does raising minimum wage affect inflation?
- How will it affect businesses?
- How will it affect your business if it takes place?
With each of these that you answer, please also answer the “how” into your comment.
I have no problem if there are opposing opinions, just be respectful. I don’t want this to be bashing, I want REAL opinions of how this will affect our country.
Once upon a time there was a kingdom where the king did not like apples. He decided he wanted to expel apples from the land, so he proposed certain changes to make apples all but disappear. The king decided to tax people who bought apples, pay people to not buy apples, tax people who produce apples, and increase the minimum price people had to pay for apples. Sounds familiar doesn’t it?
It’s such a great idea that I think we should also impose a maximum wage as well. Both would equally smother the Entrepreneur and all the Entrepreneur (and company) does for the country. Sorry, that comment was not productive and not in the spirit with which your post was intended. I’m anxious to see some productive, thoughtful comments.
Haha, you’re absolutely right Jeremy. If you allow the government establishes a federal minimum wage, you’ve opened up the discussion for a maximum wage. Because you’ve said the government can determine wages. As a matter of fact, in many ways, isnt that what a progressive income tax is? if you hit a certain wage, the government deems that you no longer are entitled to keep as much of your income than someone who makes less. Seems to be a sort of Maximum wage to me…just not fully implemented.
Out of curiosity, I looked at the income statements of two publicly traded companies: McDonalds and Apple. I’m guessing most people would assume that McDonalds pays its employees poorly and Apple rewards success. However, consider this:
McDonalds has roughly $5.5 billion in profit, created by around $2.2 billion in SGA costs (“Sales, General and Administrative operating expenses, the bulk of which is labor cost). That means for every dollar in labor, McDonalds makes $2.50 in profit.
Apple has roughly $42 billion in profit, created by $10 billion in SGA costs. For every dollar an Apple employee is paid, the company profits $4.20.
Apple is extorting profit from employees, while McDonalds is paying closer to the value labor contributes. Which is “fair?”
Of course, I image some of you are considering paying employees based on their “value” they contribute to the company. But consider this: some industries technically don’t need employees to begin with.
Look at Exxon Mobile, which has $9.6 billion in profit with nearly $20 billion in SGA costs. Oil and gas sells itself whether or not people are involved. For Exxon, employees are a drag on profits. How come nobody is complaining about Exxon overpaying employees?
There’s this story about two guys working for the railroad. Twenty years into their employment, one guy worked his way up to own the company, while the other was still laying track. One day, the track layer asked the new owner how he managed his success and why he wasn’t still in a low position, to which the owner replied: “twenty years ago you went to work for $2 an hour. I went to work for the railroad.”
Wages are not the purpose of work.
Well stated, and a great analysis. I think it goes back to principles. Do you believe that capitalism is good? or bad? Do you believe that most (not all, obviously) business owners and businesses are good? or bad?
I think talking about the minimum wage is actually useless. The discussion we need to be having is about free market capitalism. We need to discuss principles and philosphies. It is the only way to compete with pleas to emotion.
Repeat what I said yesterday:
“A $9.00 minimum wage won’t move people out of poverty.
It will, however, move about 500,000 jobs to countries in which I need a passport to visit. That should help the economy. I’d love for someone to explain how that would help.
I’m not naive and realize that some people are working minimum wage jobs and trying to support families. But most people working at that level are like I was when I made clost to minimum wage…teenagers grateful that someone would hire me to do anything. I wasn’t worth much more than $6.50/hour. But I learned a ton.”
It won’t hurt me directly, but it will hurt the economy, which hurts me. It will hurt many clients, which will hurt me in the long run.
It ends up being a vicious cycle:
Minimum wage raise dictated by government
Percentage of people laid off, unemployment taxes increase
Employee benefits (such as 401(k)) decline
Social security taxes increase
Cost of living increases
Minimum wage raise
And so on…
anything dictated by the government=less freedom and liberty for me (sorry, the libertarian streak in me coming out!)
Years ago I heard this in a sermon about social justice. Minimum wage should be the amount of money one person would need with current cost of living to support their family and live with dignity and provide for the basic four walls.
In my native Mexico City, minimum wage is currently at 64.76 pesos a day, which translates roughly into $5.09. That is for an eight hour day. The cost of the basic grocery items a family needs is 1323 pesos, or 104 USD. They need 193 hours of work to pay for that.
My point is I think we are looking at the wrong side of the equation. Simply altering the input without anticipating the impact is not going to bring better quality of life to anyone, employer or employee. However, I suspect that people’s dignity and quality of life are not even part of the discussion.
wow what a great view Lily.
Lily, I’ve never thought that minimum wage was the equivalent of living wage. Instead, I thought it was for entry level employees to be paid while learning to work.
How terrifying way to live as you have described the scene in Mexico City!
And the nationwide discussion does seem to be focusing on the economy rather than dignity and quality of life.
I get really nervous when I hear the phrase “social justice”. Not because of what it actually means, but what it has been twisted into and what many people try to push through in the name of “social justice” that is nothing more than redistribution of wealth.
Can I borrow $1000 ?
I’m totally fine with friends loaning and borrowing money. What I dont like is someone else telling me that I HAVE to loan money to someone. If I choose to do it on my own, thats not redistribution, that’s charity. 🙂
(and if I had $1000 to loan, I would loan it…as it stands, I don’t! 😉 )
Your preacher holds sermons on “Social Justice”? What kind of church are you going to? How much does “Dignity” cost today if you factor in inflation? Why just stop at $9 per hour? Why not go to $500 or $1,000 per hour? I’m sure the girl who serves me my coffee at McDonalds wouldn’t mind.
I support the president’s intent with increasing minimum wage and truthfully I support his intent with his healthcare position, which is to help people who could use some help. I get that. I am concerned though that business and small business in particular is being looked at to shoulder too much of the load though in a time of economic recovery. The unfortunate consequences of recent and potential federal government actions include higher prices on consumer goods, less consumer spending, and jobs going unfilled or overseas to cut cost. At the end of the day, how do we balance continued economic recovery with helping people who need help. That’s a tough dilemma.
I agree. That’s the dilemma: how do help people meet their immediate needs while still respecting the needs of others. I was raised in a conservative household, and I still identify with a lot of conservative ideologies, but the one that I agree with the most is that social justice should be provided by the people: individuals, churches, and businesses, not by the government. I think that we need to focus on addressing the long-term issues (improve the quality of education, and add in a focus on character development; teaching people valuable skills that could assist them in finding meaningful work; addressing mental health issues that prevent people from being gainfully employed), and then look to ourselves and our neighbors to provide the bulk of the service to those who need help, whether through donating goods, funding, or time.
I’m with you on the intent and philosphy but a major problem is we the people to include the church aren’t getting it done. We are failing those who need help. In a country this populated, the federal government is going to attempt to fill the gap which is more akin to a chasm. WE have to do more.
Here’s the real problem. We aren’t discussing the real issue in this country. We’re arguing about $7 or $9 min wage instead of discussing the root problems, which, as you’ve pointed out, Joel are personal responsibility, personal debt, moral decay, etc. We need to stop trying to attack the symptoms and look at the actual problem!
I agree with the sentiment of helping people. My concern is that government is the most inefficient means of doing so. Helping people should begin with us doing it individually and as family, then communitites, churches and private non profits.
The Federal Government does a few things very well (or can potentially do them well…): Defend our national interests, defend our borders, maintain currency, and a few other things. Everything else should be left to State and local governments.
Like I told Jaselyn, we the people have to do more to help people in need, if we’re ever to downsize the federal government. As it is, there’s more to do than state and local government can handle.
Very true. I think part of the problem is too many people just say “oh the government will help them” or “the government will take care of that” instead of stepping up and helping their neighbors and communities themselves.
That and the fact the majority of the country is in debt and simply can’t help monetarily. We have to help ourselves help others and that means cleaning up our homes first and then adopting a giving spirit. And in my experience is when you clean up your life, giving spirit comes naturally based on who’s likeness we’re made in.
in the words of someone we all know: Aaaammmmeeennn! and nothing in your comment mentioned the government saving us. We’re setting ourselves up for failure if we expect anyone else to take care of us…there may be times that others do help us, but when we expect it we cease being responsible, frugle, cautious, and good stewards.
Raising the minimum wage makes the dollar worth even less. What do I mean? Every business will have to raise their costs or take less profit anytime there is an additional expense. Unless the growth is greater than the expenses.
Personally, I don’t see the growth being greater than expenses–the additional expenses–in taxes alone (property taxes, sales taxes, income taxes, Obamacare tax, etc.) are killing the economy. More and more businesses are moving overseas to avoid the excessive taxes and regulation on businesses in the US. While raising minimum wage sounds good in theory–the only answer is less government spending which leads to lower taxes across the board.
Less taxes=less expenses=more income=growth=healthy economy
Totally right. I quoted some stats in my comment on yesterday’s post, but I’ll repeat them here. In real terms (i.e., the buying power of the dollar), the minimum wage has increased $0.50 in the last quarter century, despite being raised over $4.00 in nominal terms (i.e., the face-value without considering inflation).
Great point. Thanks for sharing that. That’s a REALLY sad statistic. We need more economists to go into politics, no?
maybe more economists…but I’d say more business owners.
Or economists who own businesses? Or maybe just require all high school students to take a basic introductory econ course. Then again, I’m biased towards the subject. 🙂
So true Jim. The thing is, you can increase wages, and you can print more money, but the one thing you can’t do is increase value. Value is value. And when the cost exceeds the value, people won’t purchase that price or service. And that is why minimum wage increases, tax hikes, etc starve an economy, it forces price to exceed value.
I suspect that raising the minimum wage will cause the following things to occur:
1. Employers will cut employees’ hours.
2. Businesses will raise prices to compensate for the increased wages.
3. People will spend less, save less, worry more.
4. Artists who were hoping to one day hire an assistant will drop the idea, sigh heavily, keep working and wondering if perhaps it is time to find a minimum wage job, maybe even one that pays cash under the table.
5. Unethical employers will pay employees cash under the table, thus teaching them to cheat and not adding taxes to the Big Pot.
6. Minimum wage employees will feel “rich”, buy more unnecessary plastic items, techno gadgets and junk food, thus adding $ to the economy, because they are probably TEENAGERS! (Actually I’d like to know the breakdown by age of those who earn minimum wages.)
Jana, I was going to challenge you on number 6–but I think you are absolutely right. That’s a scary thought. This will also lead to more debt too.
The problem is, those who push for minimum wage increases think that the minimum wage is someone seperate from the rest of the economy. They don’t understand (or dont want to understand) your second point, that the cost increases will just be passed on!
Well, I have a unique perspective. Washington State’s minimum wage is already $9.19/hour.
Here’s what I think this does: It leaves those just entering the workforce and those with minimal skills completely out of luck. Because as an employer, if someone isn’t worth 9.19 an hour, they don’t get hired, you find someone that is already working for you to do that job as well.
The irony is, well meaning politicians (with no concept of economics) trying to help the lower income and less skilled portion of our society, have actually done the exact opposite. They have been forced into welfare and unemployment because their skills have not reached a point where they can obtain employment at $9.19.
It’s sad actually. And I know it’ll cause me to be labeled an evil, heartless conservative, but I wish they’d completely abolish the minimum wage. Because I believe most business owners are good, decent people and will pay a fair and honest wage (and if they dont, they won’t remain in business!).
Anyways, that’s my two bits about the minimum wage 🙂
I read an op ed piece in the WSJ this morning that said the original purpose of the minimum wage was to create a situation where black men, traditionally willing to work for less, were paid as much as white men. Ignoring the fact that black unemployment is currently higher than white unemployment. The people who will work for less no longer live within the borders of this country where the US government can control their pay. While I appreciate the sentiment behind the idea of a minimum wage to pull people out of poverty. I don’t think the application is working.
I looked at the op-ed. Just so you know, minimum wage legislation had nothing to do with race… ever. As far as pay and employment equality, Congress didn’t address the elderly pay gaps, gender pay gaps, and racial pay gaps until 1961, 1963, and 1964 respectively. Minimum wage laws were passed in 1933 (declared unconstitutional) and 1938 as part of an “economic recovery” program bringing the country out of the Depression, and have been amended ever since.
oooh, I wish they’d been declared unconstitutional the second time they were passed 🙂
The problem with minimum wage laws is the underlying assumption that money alone is all people need to get out of poverty. There are too many factors affecting every different individual for any government to try and “fix” the
problem. The greater issue is a lack of information (in most cases), about opportunities for change, availability of services offered by individuals, churches, and other non-profits, and sometimes, the will to make meaningful changes to affect prosperity is lacking. At the core of the poverty issue is the mistaken belief that one has no control over their situation, and thus, no other option but to be impoverished. Are there cases in which an individual really has no options? Absolutely, but I believe that number is far smaller than our government would have us believe. We look at how much money someone is paid in a vacuum, and determine that if they just made a little more money, their problems will be solved. No, the much more serious issues are social, which can only be solved when people invest their time in relationships with an eye towards building up the individual so that they can see themselves as God sees them, and thus, make choices that will produce different, better outcomes for themselves and their families. This is an area in which no government can or should be delving.
In the state of the union address on Tuesday night, the President closed with examples of extraordinary citizens doing extraordinary things and said, “We should follow their example.” He’s not wrong, but “we” should mean individuals, not government, which I’m sure is what he meant.
I think in the short run, higher minimum wages will hurt the economy because in the absence of high demand for products and services, employers will be forced to lay people off or reduce their hours in order to comply with the new requirements. Over time, however, (at the risk of being lambasted by my peers), employers will adapt and figure out how to grow, increasing their need for labor, and will find a way to be prosperous and profitable again. After all,
you have to have more money coming in than you have going out, or you’ll be out of business and nobody wins. While higher taxes and more government regulation are huge impediments to profitability, the bigger problem is uncertainty in Washington. Decide upon, and tell us, the rules, and then get out of the way. Let the entrepreneurs do what they do best, which is find their way to profitability, within the established regulations and guidelines – everybody wins.
At the risk of going completely off topic – for those of you who have commented here that “we” not government, need “to do more,” how many of you are actually investing time in some outside endeavor to actually “do something” about the poverty issue?
Thou Shall Prosper… the only way to create equality is to eliminate choice! no matter how much money you give to people they are still going to make good and bad choices with it.
Oh, and good bye to the fast foot dollar menu, we will miss you!
I think there should be a lesser min wage for those without high school diplomas/GED’s. Teenagers don’t need $9/hr and many aren’t worth it. An minimum age of 18 could also work for the same reason. Maybe a mandatory course in Ramsey economics should be passed before getting the higher wage so it wouldn’t be wasted on stupid plastic crap from overseas.
A lesser min wage? or no min wage at all? I vote for that one. Here in WA state we dont have a choice…we’re already above $9 for min wage…
Haven’t read through the rest of the comments yet, so I might duplicate some others.
It seems that raising the minimum wage will bring more mediocrity into more workplaces. Those that have worked for a while to get to $9/hr will most likely not get a raise, but those just coming in will immediately get the benefits. The current employees will begin feeling cheated. The saying that Dave mentions (can’t remember where he got it from): “Sanctioned incompetence demoralizes.” The good employees will get frustrated and leave, allowing more bottom feeders to move in. Employers, feeling the increased financial pressure, will not hire as many people. Not very helpful for unemployment. The employees at those companies will have to do the same work with less people.
Maybe this won’t happen everywhere. Maybe it won’t be so dramatic. But it’ll happen.
I run a small restaurant. I don’t have insurance. I pay bills, labor and vendors before i see our month-end profit. Considering that I’m now going to have to provide health insurance to staffers, it follows the same lacking rationale to throw on a pay increase.
I have a great team – very deserving. But there must be a balance. Knowing my words fall short of government reason, I must say that until they can successfully prove their ability to manage money, they should have no control over how I manage mine.
I think we may need to concentrate more on wages in 3rd world countries and companies that take advantage of these wage rates to gain profits. I was in Guatemala this summer. In the town we were serving, men and women were working 12-14 hours days making Hollister jeans. There payment for a days work in which I’m sure they made many pairs of jeans was a few dollars. That’s it. Now go to your local mall and try to buy a pair of Hollister jeans. Do you know how much you’ll spend? ~$80+! In Guatemala, kids are dying every day because they don’t get fed. Guatemala sports the 4th highest rate of child malnutrition world wide. Meanwhile, Hollister (and other companies) are making money hand over fist. I don’t necessary mean to call out Hollister, but I think we concern ourselves so much with our local wage rates that we miss out on the real exploitation happening around the world.
Govt. intrusion into the marketplace hurts the economy because governmental dictates are separate from market forces. The market is never wrong; the govt. almost always is.
Raising the minimum wage can affect inflation because a piece of the cost of production has, by mandate, increased, therefore the end product price can increase, and typically does.
Businesses will do more with the employees they have, and hire fewer if any new employees. The end product price is determined by the market; if the cost of a new employee is distorted by govt. mandate, the only thing a business owner can do is NOT hire someone.
I don’t yet have a business but I love the business owners, who risk, and sweat, and create opportunity.
Remove minimum wage laws entirely. The poor will benefit, and the rest of us will benefit as well, as entry into the marketplace for the unskilled becomes easier, and the cost of the end products is reduced (potentially).