ABSURDITY OF RAISING MINIMUM WAGE
Let's talk about the fact that Minimum wage just jumped from $6.55 an hour to $7.25 an hour. We've had the minimum wage laws in this country since 1938, so they are nothing new - but when will the elected (and the electorate) realize that the people we hurt the most when we raise minimum wage are the people MAKING minimum wage. Yeah - it sounds like we're doing a good thing for the poor people, barely making it, living on minimum wage - but are we really doing a good thing when we raise that?
I do not believe we are, and if you follow my line of thinking - you may agree.... or you may disagree. That's your choice.
Who pays wages? Employers do. When we raise minimum wages, what do the employers that are paying minimum wage do to compensate? I mean, if they are paying someone $6.55 an hour and it jumps by 70 cents (which is a 10% increase), do you really believe that the owner and the manager of the business is going to arbitrarily decide to take a 10% cut in THEIR pay or in the profits? Of course not! Only a fool would be so moronic to believe that. So - the owner goes up on the prices of everything they sell by at least 12%.
Wait a minute. His expenses went up 10% and he's going up 12%? That doesn't sound fair, does it? No - but then - his expenses didn't go up 10%. The wage earners hourly wage went up 10% - but the employer's cost went up about 12%. OK - let's figure out where the difference is. When I'm paying an employee $6.55 an hour, they are earning $262 a week on a 40 hour week or $1126.60 on a 4.3 week month. As an employer, I'm also having to pay an extra 7.5% to match social security witholding (FICA), so my cost on that employee is another $85.00. On top of that, I also have to pay workers compensation insurance to the state on each employee - so let's assume that is another 2% to 7% of what I pay the employee (based on the job risk, danger, liklihood of them getting hurt on the job, etc) - so to be conservative - let's say 2%. So, 2% of the $1126 is another $23 a month I'm paying. On top of that, I also have holiday pay, vacation pay, sick pay, etc... - but let's just talk about the taxes only and not even count the other pay.
So - on the $1126.60 that I pay them, my expense includes another $108. $108 is about 9.5% of the $1126, so that evens out. So - when I give my employee a pay raise of 70 cents (to abide by the law), my cost will increase by 109.5% of that 70 cents or 77 cents. We've already used common sense and figured out that I'm not going to eat that 77 cent increase per hour, so I'm going to raise the costs of everything I sell by just a little to compensate. Let's assume that I raise it by only 12%. My employee got a raise of 10% - but to buy the same thing he bought last week, now he's paying 12% more. Who loses?
Now - multiply that by all of the companies that sell anything from groceries to gasoline to clothes to school supplies, to diapers, etc... Who loses? It's not the people in management making a percentage of the profits - as their profits just went up. It's not the business owners who went up on their prices. It's 3 people that I can immediately think of.
1. The people making an hourly wage - as they are now paying more than the increase they received.
2. The people working for the government on a fixed salary that are frozen (like all California or federal employees)
3. It is the physicians that own their own practice because their fees have been set by the insurance carriers and Medicare and it will be years before they get an increase based on the costs rising today - as long as they continue to practice how they have always practiced. I can't think of any other profession that has locked themselves into contracts with insurance carriers that prohibit the physician raising their own compensation for performing the exact same duty - other than physicians.
So - when you hear that the government - in their infinite wisdom - has blessed the poor worker in this country with a raise in minimum wage - think twice about it.
Don
I do not believe we are, and if you follow my line of thinking - you may agree.... or you may disagree. That's your choice.
Who pays wages? Employers do. When we raise minimum wages, what do the employers that are paying minimum wage do to compensate? I mean, if they are paying someone $6.55 an hour and it jumps by 70 cents (which is a 10% increase), do you really believe that the owner and the manager of the business is going to arbitrarily decide to take a 10% cut in THEIR pay or in the profits? Of course not! Only a fool would be so moronic to believe that. So - the owner goes up on the prices of everything they sell by at least 12%.
Wait a minute. His expenses went up 10% and he's going up 12%? That doesn't sound fair, does it? No - but then - his expenses didn't go up 10%. The wage earners hourly wage went up 10% - but the employer's cost went up about 12%. OK - let's figure out where the difference is. When I'm paying an employee $6.55 an hour, they are earning $262 a week on a 40 hour week or $1126.60 on a 4.3 week month. As an employer, I'm also having to pay an extra 7.5% to match social security witholding (FICA), so my cost on that employee is another $85.00. On top of that, I also have to pay workers compensation insurance to the state on each employee - so let's assume that is another 2% to 7% of what I pay the employee (based on the job risk, danger, liklihood of them getting hurt on the job, etc) - so to be conservative - let's say 2%. So, 2% of the $1126 is another $23 a month I'm paying. On top of that, I also have holiday pay, vacation pay, sick pay, etc... - but let's just talk about the taxes only and not even count the other pay.
So - on the $1126.60 that I pay them, my expense includes another $108. $108 is about 9.5% of the $1126, so that evens out. So - when I give my employee a pay raise of 70 cents (to abide by the law), my cost will increase by 109.5% of that 70 cents or 77 cents. We've already used common sense and figured out that I'm not going to eat that 77 cent increase per hour, so I'm going to raise the costs of everything I sell by just a little to compensate. Let's assume that I raise it by only 12%. My employee got a raise of 10% - but to buy the same thing he bought last week, now he's paying 12% more. Who loses?
Now - multiply that by all of the companies that sell anything from groceries to gasoline to clothes to school supplies, to diapers, etc... Who loses? It's not the people in management making a percentage of the profits - as their profits just went up. It's not the business owners who went up on their prices. It's 3 people that I can immediately think of.
1. The people making an hourly wage - as they are now paying more than the increase they received.
2. The people working for the government on a fixed salary that are frozen (like all California or federal employees)
3. It is the physicians that own their own practice because their fees have been set by the insurance carriers and Medicare and it will be years before they get an increase based on the costs rising today - as long as they continue to practice how they have always practiced. I can't think of any other profession that has locked themselves into contracts with insurance carriers that prohibit the physician raising their own compensation for performing the exact same duty - other than physicians.
So - when you hear that the government - in their infinite wisdom - has blessed the poor worker in this country with a raise in minimum wage - think twice about it.
Don
Comments