Besides benefitting pandering pols, why have a $15 minimum wage?

Commentary by James Shott

Democrat presidential candidate Bernie Sanders literally screamed through a bullhorn at a campaign event in support of raising the federal minimum wage from $7.25 an hour to $15. “I’ve been pleased to march and struggle with all workers in this country who are fighting for $15 an hour and a union,” he told the crowd. “We are the wealthiest country in the history of the world, people should not have to work for starvation wages.”

The City of Seattle, Washington last year raised its minimum wage to $15 to take effect this month, San Francisco and Los Angeles, California followed suit shortly thereafter, and last week the California State Legislature passed a measure to raise the state’s minimum wage in steps to $15 by 2022, and Governor Jerry Brown pledged to sign it.

Politicians frequently advocate for higher minimum wages, which attracts a lot of positive attention from low wage earners. Campaign speeches focus on how hard it is to live on minimum wage, as if a large proportion of the workforce earns the minimum and that large numbers earning at that level are trying to support a family, and all of these people really are being enslaved by greedy businesses. Facts, predictably, tell a different story.

At the end of 2014 the number of Americans 16 and older earning hourly wages was 77.2 million. Of those, just under 3 million earned the minimum wage, about 4 percent. Among all workers that year, hourly and salaried, those earning at or below the minimum was just 2 percent, and only 1.04 million minimum wage workers held full-time jobs. Of the entire full-time workforce, only 0.7 percent earned at or below the minimum wage.

Who are these 3 million minimum wage hourly workers? Nearly half – 48.2 percent – are between 16 and 24 years of age, and 2.6 percent are 65 or older. More than half work in food preparation and related “hospitality” industries, 31.4 percent are high school graduates, 23.1 percent did not earn the high school diploma, and only 9.1 percent have a college degree.

Most of them are second or third earners in their household; the average family income of a minimum-wage worker exceeds $50,000 a year. Furthermore, most minimum wage workers graduate to higher wages quickly as their skills and experience increase, usually getting a raise in less than a year.

People generally make minimum wage when they get an after-school job, or to help out while they are going to college. They make minimum wage for jobs that require little skill, and are often supplemented by tips. People make higher wages when they gain experience or hold jobs requiring higher levels of skill. Professionals and technically trained workers make more than fast food workers, checkout clerks and grocery baggers, as it should be.

Those who run businesses have to decide how much they can afford to pay for the different types of jobs in their business. Wages are based upon the importance of each job to the business, the experience and skill of individual workers, the number of people available for each job, and the overall cost of labor and other expenses, balanced by business income.

When government edicts artificially increase labor costs, businesses must offset the increase by cutting costs, increasing income, or a combination. Every minimum wage increase of $1 an hour costs a business about $2,500 per employee per year in wages and payroll costs. Other employees making a little more than the minimum will either require a raise, or deserve one, dramatically increasing the labor costs. Something has to change to offset that expense.

Businesses likely will reduce staff, particularly cutting positions where several workers have the same job. Maybe they employ robots or other machines to do certain tasks. Have you been to a restaurant that has a touch-screen device on each table? You can order and reorder some items and pay your bill with a machine.

There now is a robot burger maker that can turn out up to 360 burgers per hour. It can grind, stamp and grill made-to-order patties. It can cut and layer the lettuce, onions, pickles, tomatoes, etc., put them on a bun, and even wrap them up to go. This device would replace three full-time kitchen staff and ultimately cost the business less.

Higher labor costs mean that prices of many items will necessarily go up, some significantly. Even as minimum wage workers get more money, they and everyone else will see their cost of living increase, gobbling up a good bit of the higher wage.


Few Americans earning the minimum wage really “need” a higher wage to survive. Analyzing the coming increase in Alberta, Canada to $15 per hour, Robert P. Murphy and Charles Lammam of the Fraser Institute concluded, “In short, the minimum wage is neither an efficient nor effective strategy for helping the working poor.”

Minimum wage earners need to work their way to higher pay through education, training and gaining experience, like Americans have done for decades. A federally mandated minimum is, and always has been, a colossal mistake. It will reduce jobs among the very people it is supposed to help.

Cross-Posted from Observations

Washington State and Seattle set the nation’s highest minimum wage

Commentary by James Shott

   Since 1998, Washington State has led the nation in both local and statewide minimum wage levels, which attracted the attention of Labor Secretary Tom Perez who praised the state for having “the highest minimum wage in the country for the last 15 years.” But the full picture is much less rosy than Secretary Perez would have us believe.

   In an article on Forbes.com the Freedom Foundation’s Maxfeld Nelson put things in perspective. “Although the state’s overall job growth has remained strong since adoption of the high minimum wage, growth in industries with a prevalence of low-wage workers has slowed,” he reports. Citing Bureau of Labor Statistics and Census Bureau data he writes that while Washington State’s share of the nation’s population increased by 5.7 percent from 1998 to 2014, and its share of total U.S. jobs increased by 6.3 percent, the state’s share of U.S. hotel and restaurant jobs, which could have been expected to rise commensurately, fell by 5.7 percent. Those industries are where thousands of people the higher minimum wage was supposed to help were once employed.

   In fact, while Washington’s teen unemployment rate had roughly paralleled national trends prior to the 1998 minimum wage hike, every year since then it has been substantially higher, and at one point reached 34 percent above the national rate.

   Not content with the state’s $9.47 minimum wage, SeaTac, a small city that depends heavily on businesses benefitting from its airport, decided to raise its minimum to $15 an hour in a close vote in a 2013 election. “Although the narrow drafting of the ordinance and ongoing litigation have limited the law’s scope to a mere handful of businesses and employees,” Mr. Nelson writes, “it is still having consequences. A parking company has added a ‘living-wage surcharge’ to its rates. One hotel closed its restaurant and laid off 17 employees. Employees at another hotel reported losing an array of benefits, with one stating that the $15 minimum wage ‘sounds good, but it’s not good.’”

   And now Seattle has hopped on board that bandwagon with a phased-in minimum wage, raising the minimum to $11 an hour April 1, and the rate hike will be fully implemented by 2025. Some businesses, however, are on a sped-up schedule, like Ritu Shah Burnham’s Z Pizza restaurant.

   Even though she has only 12 employees, her business is classified as part of a “large business franchise,” putting her on the fast track to raising the minimum. “I’ve let one person go since April 1, I’ve cut hours since April 1. I’ve taken them myself because I don’t pay myself,” she told a local TV station. “I’ve also raised my prices a little bit; there’s no other way to do it.”

   One of her employees was initially excited at the advertised benefits of getting a raise and having a better life. “If that’s the truth,” he told the TV outlet, “I don’t think that’s very apparent. People like me are finding themselves in a tougher situation than ever.” He will only get to enjoy the higher pay until August, when Ms. Burnham has determined she must close her business. “I have no idea where they’re going to find jobs, because if I’m cutting hours, I imagine everyone is across the board,” she said.

   Jake Spear, the director of 15 Now Seattle, a wage hike advocate group, was unmoved at the plight of these 12 employees. It’s just one restaurant, after all. “Restaurants open and close all the time, for various reasons,” he said.

   Back during the flower child era of the 1960s and 70s, the operative slogan was, “If it feels good, do it!” That slogan has more recently been co-opted by pandering politicians, labor union leaders, and others more interested in the immediate rewards of increased numbers of fawning, adoring voters and thankful union members than with the reality of lost jobs, higher consumer prices, and struggling businesses. They have another favorite slogan, as well: “Damn the torpedoes! Full speed ahead!”

   The fallacy in the minimum wage debate is that so many people – liberal feel-gooders, people new to the workforce, people in the most basic jobs and/or with the lowest skill levels, along with pandering politicians and union bosses – don’t understand the significance of varying wage levels. It eludes them that wages must be earned, not merely given like a gift, and that higher wages require more training, knowledge, skill and experience from workers than lower wages do. There is more involved in earning a high wage than just getting hired and showing up for work. You have to contribute something positive to the business you are fortunate enough to work for, and the greater your contribution, the more you are able to earn.

   A mandated high minimum wage contributes to the entitlement mentality, where people expect to exist without having to contribute very much to their own well-being. This is not a positive development for a society that was built by generations of Americans who were hard working and self-reliant.

   Detroit and Baltimore are graphic examples of the failure of liberal policies, and now we see Washington State and Seattle heading down that same path.

Cross-posted from Observations

If we raise the minimum wage, we’ll get these fantastic results!!

The narrative of the left is that even people who have never had a job and/or don’t have any skills deserve and need a “living wage.” Merriam-Webster defines a living wage as “a wage sufficient to provide the necessities and comforts essential to an acceptable standard of living,” which varies widely depending upon where one lives.

The drive for a hike in the minimum wage to $10.10 an hour, or sometimes as much as $15 an hour, lives on as a cause du jour for some Americans, defying the laws of business economics. Workers, labor unions, and politicians, support the wage hike through lobbying efforts, civil demonstrations, and labor strikes often paid for by labor unions.

These folks reject out of hand the fact that every job has an actual calculable value in the business it is a part of that takes into account the benefit to the business’s entire operation, the qualifications of the worker, and other real factors, unlike what drives the minimum wage hike: it is a nice idea, makes people feel good, helps unions raise members’ wages, and garners support for politicians.

The National Center for Policy Analysis (NCPA) notes that minimum wage hike proponents support an increase because it would save the government money in social support services, since those whose wages rise will be less likely to seek and need welfare benefits.

Research by the Economic Policy Institute shows that increasing the minimum wage to $10.10 an hour would reduce welfare spending by $7.6 billion, but that is only 3.8 percent of the total of $200 billion in welfare spending that taxpayers fund. Not that saving seven or eight billion is a bad idea.

However, in its efforts to give to people things they should earn through personal effort, the left focuses on the benefits of their ideas, and ignores the negative consequences.

This erroneous reasoning is responsible for a long and growing list of government programs the negatives of which far outweigh their benefits. The Community Reinvestment Act combined with repealing Glass-Steagall, and Operation Fast and Furious spring quickly to mind.

Addressing the negative impact of a wage hike, NCPA cites research by Ben Gitis of the American Action Forum asserting that raising the minimum wage will result in lost jobs. His analysis shows that 2.2 million new jobs would not be created, totaling a stunning $19.8 billion in lost earnings, if the minimum wage is increased.

The truth is that the number of minimum wage earners who really need a living wage is tiny. Only about 3.6 million workers, or 2.5 percent of all workers, earn the minimum wage, according to Bureau of Labor Statistics, and teenagers living at home comprise 31 percent of that group. And 55 percent are 25 years old, or younger, mostly inexperienced and just learning skills. Therefore, of all workers over 25, only 1.1 percent would be affected by a wage hike that would cost 2.2 million future jobs.

Combine that small number with the fact that well over half of workers earning less than $9.50 an hour are the second or third earner in a family, two-thirds of whom earn more than $50,000 a year, and that critical number shrinks even more.

As a percentage of hourly workers those earning the minimum wage has shrunk dramatically since 1980, when they comprised 15 percent of that group. Today, that portion is just 4.7 percent. And more than half of them are part-timers working less than 30 hours a week.

If you earn the minimum wage it certainly is appealing to imagine getting an increase in your wage of about half. But a hike in the minimum wage has to have solid economics-based reasons behind it, or it shouldn’t happen. The economic reality is that the numbers just don’t add up to support a $10.10 an hour minimum wage.

This wildly popular idea evolves from not understanding business and basic economics. How, in a country with education spending on average of $11,000 per student per year, can there be so many who have no idea about things like supply and demand, and how high costs, high taxes, excessive regulations raise prices and decrease sales.

The United States has just lost the top spot in the world in productivity to China, the first time since Ulysses S. Grant was president that America has not led the world.

A friend who ran a company doing business in several foreign countries was talking about his company’s expansion into China a few years ago. At the time China had 1.35 billion people, he said: 100 million communists, and 1.25 billion capitalists.

While Communist China embraces capitalist principles and becomes the most productive nation, the United States, once the bastion of free enterprise, increasingly embraces socialistic mechanisms and lost the lead in productivity for the first time in more than 130 years.

Most likely few of the proponents have ever had to make a payroll or keep a business viable in the face challenges like competition, high taxes and onerous regulations.

Foolish ideas like raising the minimum wage without sound reason helps explain our loss to China and our overall anemic economy. 

Potpourri: Comments on the passing scene

From the “Aha” department: Judicial Watch reports that “Department of Justice attorneys for the Internal Revenue Service told the organization on Friday that Lois Lerner’s emails, indeed all government computer records, are backed up by the federal government in case of a government-wide catastrophe.”

However, attorneys also said it would just be too dad-gummed hard to go through the backup files to look for evidence of possible criminal behavior. Imagine that: an emergency backup of the entire government, so that if the entire government computer system were to be destroyed, all the information is protected, but it’s so disorganized that you can’t easily find anything. Doesn’t that make the backup essentially useless? Was this system designed and built by the same people that gave us healthcare.gov?

Do you suppose that none of the people at the IRS who claimed the emails had been forever lost knew about this backup? Really? 



 *****

Raising the minimum wage by $2.85 an hour to $10.10 an hour effectively imposes an “unskilled labor tax” on employers of $6,170 per worker, according to the American Enterprise Institute’s Mark J. Perry. That includes not only the increase in wages, but also increases in FICA, Medicare and unemployment taxes.

A survey of 400 U.S. Chief Financial Officers conducted by Duke University finance professor Campbell Harvey shows that a substantial increase in the minimum wage will, as so many have said for so long, cost jobs, as well as reduce job benefits and increase outsourcing.

The survey showed that in response to a $10 per hour minimum wage:
    •    Sixty percent of the firms said they would lay off employees.
    •    Forty percent said they would slash benefits to employees.
    •    Seventy percent said they would increase contracting, outsourcing, or moving actual production outside the United States.

A report on the study by the National Center for Policy Analysis notes that, “Businesses will not simply absorb these costs; they will look for ways to minimize the $6,000 tax by reducing the number of workers they employ, cutting workers' hours, halting additional hiring or finding ways to use automation to replace work done by employees. Employers may also cut employees' non-monetary fringe benefits rather than eliminate their positions.”

*****

Since President Barack Obama ended the War on Terror, America’s new efforts to combat, er … fight, umm … deal with terrorism has a new name: “comprehensive and sustained counter-terrorism strategy.” This strategy has already produced more than 150 airstrikes in Iraq that killed ISIL/ISIS fighters, destroyed weapons, and allowed Iraqi and Kurdish forces to reclaim key territory. Thank goodness we are not involved in another war.

The president announced that with allies and Congress, America will lead a broad coalition in a counter-terrorism strategy called Operation Double Bogie to roll back this terrorist threat (from behind?).

*****

While drug smugglers and who knows what other filth sneak in and out of the U.S. over the non-existent southern border, Border Patrol agents busy themselves making birthday cakes for illegal aliens who have crossed the border into the country.

This information comes via Pinal County, Ariz. Sheriff Paul Babeu, who appeared on Neil Cavuto’s “Your World” program last Thursday on Fox News Channel.

The sheriff said, “I can give you a window into this administration because just a month ago, while all this was going on, we heard, myself and countless sheriffs in Fort Worth, Texas, heard … how wonderful it was these Border Patrol agents, federal law enforcement, had a birthday cake for this 13-year-old Honduran, and he’s never had a cake ... I called him on that, and said, ‘how on earth have we arrived at this point where it’s become the job of our Border Patrol agents, who their sole purpose should be to protect our country and secure our border, is to do what you just said, to have a birthday cake for a 13-year-old Honduran?’”


*****

From the Nervous Hospital, Unhinged Ward: Rep. Nancy Pelosi (D-Cal.) claims that Democrats are not “fear-mongers;” but said on “Real Time with Bill Maher,” “It would be very important for the Democrats to retain control of the Senate,” she warned. “Civilization as we know it today would be in jeopardy if the Republicans win the Senate.”

*****

Earlier this year came news from Working Group II of the Intergovernmental Panel on Climate Change that we face increased risks from human-induced climate change. These new risks are, of course, the result of CO2 in the atmosphere, which now has more CO2 than it previously had. Over the last 100 years the number of CO2 molecules in a given quantity of air is up from 3 to 4.

No wonder they are concerned: that represents a 33 percent increase in CO2!

That sounds like a really serious problem, until you realize that the quantity of air in this equation is 10,000 molecules. We now have 4 molecules of CO2 per 10,000 air molecules, instead of 3. The amount of CO2 in the air is now 4 ten-thousandths (.0004), up from 3 ten-thousandths (.0003). Catastrophe has descended on us; we are surely doomed.

Maryland's shipwreck: it only gets worse

Maryland’s shipwreck: it only gets worse

 

Maryland’s politicians believe that harsh treatment of its business and professional community is a necessity regardless of the effects it causes. Ranked in the middle to the bottom third of business friendly states, depending on the survey, Maryland continues to pour on additional requirements for businesses to maintain their functioning in this bluest of blue states. The latest assault on the business community came in the form of a minimum wage increase to be graded in over several years. Though the $10.10 goal failed at the federal level Governor O’Malley and his battalion of sycophants wanted to succeed where President Obama failed. Merit pay increases do not exist where progressives rule. Instead wage increases are forced on businesses through legislative fiat. In a sense Maryland has usurped private sector budgets with one more flagrant action to diminish their ability to stay afloat. A $10.10 per hour wage potentially means  $15.OO after all the additions such as matching Social Security taxes, matching Medicare fees, unemployment assessments, workmen’s comp fees and much more that are exacted on employers. Except for a few companies pushing for this increase, the rest of the business community must eat the costs or abandon Maryland. A recent poll suggests that 47% of Maryland residents would leave the state if circumstances permitted. (http://www.wmdt.com/story/25445696/47-percent-of-marylanders-want-to-leave-the-state) Harsh tax assessments were given as a major reason.  A poll of businesses may yield similar results.          

 

Employers have minimal rights under Maryland law when a problem exists with a worker.  Employees have multiple recourses when a workplace problem exists. The reason why is obvious. Maryland views its business community with disdain and as a bank to extract money wherever and whenever it can, nothing else. Toxic regulatory structure along with heavy taxes, levies and a judiciary unfriendly to businesses have caused workplace environments to relocate to more friendly domains. During a recent visit to several government buildings in and around Preston Street in Baltimore I encountered numerous business owners whose various licenses were being held up for unpaid tax bills and or fees. From owners of nursing homes to restaurants they were all called downtown to pay these excessively inflated assessments or be forced to cease functioning in the state. These business owners may not be aware that more financial extortion is being conjured as I write these words. The next several efforts will include paid sick leave and extended pregnancy benefits paid out of an employer’s budget, which may already be deep in the red. Considering opening a business in Maryland read the writing on the proverbial wall. The state and its lawyers will be gunning for you if you don’t give in to their left of the left governing style. Next article will discuss how the state of Maryland manages to eviscerate its professional population.

http://www.msba.org/departments/commpubl/publications/brochures/workplace.asp

 

Mark Davis, MD President of Healthnets Review Services and Davis Book Reviews

www.healtnetsreviewservices.com   platomd@gmail.com

Dr. Davis’ latest book is: Obamacare: Dead on Arrival, A Prescription for Disaster.

What’s more important, a minimum wage hike, or fixing the economy?

Commentary by James Shott

An analysis by the Congressional Budget Office (CBO), a nonpartisan arm of Congress, shows that both sides in the debate over whether to raise the federal minimum wage from $7.25 an hour to $9.00, $10.10, or even $15 an hour have relevant points to make.

Advocates believe that the wage hike would lift nearly a million people out of poverty, increase productivity, reduce turnover and give those receiving the raise more money to spend, and that would translate to businesses recording higher sales, and an overall improvement in economic activity.

A $10.10 minimum wage, the CBO says, means 900,000 fewer people in poverty, and job losses will comprise only 0.3 percent of jobs affected by the wage hike.

The hike would boost wages for most low-wage workers, as about 16.5 million workers who make less than $10.10 an hour would see higher earnings once the higher minimum is fully implemented, which Democrats in the House and Senate have been calling for. And then, those making slightly more than the new minimum wage may feel they need a raise too, and employers would be virtually compelled to give them one in what the CBO calls a "ripple effect."

Let’s review: Advocates believe we should raise the minimum wage because the more low-wage workers make, the more they'll have to spend, and the better that will be for businesses selling products and services. People move out of poverty and spend more and consequently businesses prosper from greater sales. Our economic problems magically dissolve. Does it get any better than this?

Unfortunately for the advocates, good decision-making requires looking at all the factors, not just the ones that support a particular position.

Opponents point out that higher wages lead to higher prices, and lost jobs, and wages need to be related to the work involved and its value to the company, not artificially determined by Washington bureaucrats.

An essential factor that needs to be considered is what happens inside businesses when their labor costs increase? They must make adjustments in other expense areas, increase productivity or increase prices to maintain profitability and stay in business.

The other side of the CBO job loss estimate is that while only 0.3 percent of minimum wage workers will lose their jobs with the proposed wage hike to $10.10 an hour, and that sounds like a small effect, the number of actual people comprising that 0.3 percent is 500,000. So 900,000 will be lifted out of poverty, but more than half that number will lose their jobs. Thus, the picture painted by the CBO is somewhat less rosy than the advocates believe.

A study for the National Center for Policy Analysis by Richard B. McKenzie, explains that there are other forms of compensation to consider, nonmonetary benefits that may be as much as 30 percent over and above wages of all workers, a substantial percentage of the total compensation employees receive. Faced with higher labor costs, employers may make adjustments to these nonmonetary benefits to balance things. These benefits include relaxed work demands, workplace atmosphere, schedule flexibility, job security, and hours of work. Employers may also have to cut jobs, curb summer hiring, opt not to replace workers who leave; lower their profitability and/or raise prices to customers.

Despite what you may hear, read or think, most employers want the best employees they can get; the most productive, best trained, and most devoted workers they can find. They are willing to pay them to keep competitors from luring them away, however, there are financial limits to what businesses can pay without making other changes.

They may reduce jobs or cut worker hours, increase demands on existing employees and impose a stricter work atmosphere to increase productivity, replace workers with machines, or look for cheaper materials from overseas where labor costs are lower, affecting American suppliers.

The US economy is suffering, as evidenced by, among other indicators, the labor force participation rate, which shows that only 63.2 percent of Americans age 16 or older are participating in the labor force, the rate having fallen over the last several years to 1977 levels.

We need an atmosphere that encourages businesses to create jobs, not artificially raise the wages of the least skilled, least experienced people in the labor force, particularly when doing so will cost 500,000 jobs, and further depress the participation rate.

Among the many stunning failures of the Obama administration is its proclivity to pander to small constituencies to gain political support, all the while ignoring the broader problems facing the nation.

When an administration chooses to implement narrowly focused policies conceived for political gain, you get what the Obama administration has produced: an almost non-existent recovery from the recent recession, millions of Americans who can’t find a job, millions more who are too discouraged to keep looking and have dropped out of the labor force, and still millions more Americans on food stamps and other forms of welfare.

The Obama administration and Congressional Democrats have shown conclusively that the serious problems of the nation are far less important to them than winning the next election.

Cross-posted from Observations

What do minimum wage demographics say about raising the wage?

There has been a lot of uproar in the media lately about raising the minimum wage so that those people earning it would earn a “living wage.” But what do demographics about those earning the minimum wage tell us?

According to the Current Population Survey (CPS), which is a joint effort of the Bureau of Labor Statistics and the Census Bureau, 3.7 million workers reported earning the minimum wage of $7.25 or less per hour. Now 3.7 million is a lot of people, but when looking at the entire workforce, it’s a small portion – only 2.9 percent. Slightly more than half of them are aged 16 to 24, and 62 percent of that group are students.

Nearly 80 percent of those earning the minimum wage work part-time jobs and belong to families that earn nearly triple the poverty level for a family of four at $65,900 a year, while only 22 percent live at or below the poverty line. Three percent have finished college and obtained a degree, and 5 percent are married.

Many of those aged 25 and older work in jobs where they also earn tips, like restaurant workers, so their total pay most nearly always exceeds the minimum wage. While most do not live in middle- and upper-income families, they also are not living in poverty, having an average family income of $42,500, just less than double the $22,350 poverty line level for a family of four.

Advocates of raising the minimum wage – and many minimum wage earners who respond to the hype those advocates produce – complain that you can’t raise a family or even live a decent life on the minimum wage, so therefore it should be raised to provide a “living wage.”

When you realize that only 3 of every 100 workers earn the minimum wage, the problem doesn’t seem as dire as the advocates for a wage hike want you to believe. And when you look at the kinds of work that minimum wage earners perform, and who minimum wage earners are, it seems even less dire. These jobs require little education or training, and are overwhelmingly held by young people living at home.

Based upon the demographics, there’s no economic reason for a higher minimum wage.

You won’t find trained and educated people like electricians, mechanics, carpenters, plumbers, nurses, pilots or teachers, or lawyers, doctors, CPAs, engineers, and others who have gotten an extensive education and additional training making minimum wage, or anything near it.

But more importantly, the number of minimum wage employees who really need a “living wage” because of family or unusual personal needs is very small, and there are better ways to help them.

Assuming all minimum wage employees worked 20 hours a week, a $2 increase in the minimum wage would cost employers $2,080 a year for each employee, plus increased payroll taxes. For all 3.7 million workers, the increase would cost $7.7 billion a year, plus increased payroll taxes. Those working more than 20 hours a week adds even more costs.

Additional costs arise when those making between the old and new minimums get increases to get them to the new minimum, and when those making close to the new minimum get increases to keep them proportionately higher than the new minimum. The costs would be substantially higher than $7.7 billion. And guess who bears that cost? Employers? No.

Consumers will pay higher prices, producing reduced sales, and those higher prices will also affect those who just got a raise.

A Heritage Foundation research report released last February notes that while many advocates of higher minimum wages suggest a higher wage “to help low-income single parents attempting to survive on just a minimum-wage job … just 4 percent of minimum-wage workers – or 148,000 – are single parents working full-time, compared to 5.6 percent of all U.S. workers.”

To add billions in increased consumer costs to benefit a relative few doesn’t make sense. They need to become qualified for better paying jobs, and if that is difficult or impossible for them, and if government is going to provide welfare, those people should receive help.

“Contrary to what many assume,” the Heritage report notes, “low wages are not [the] primary problem [of the poor], because most poor Americans do not work for the minimum wage. The problem is that most poor Americans do not work at all.”

The faction promoting a higher minimum wage consists primarily of two types of people: those who do not understand or don’t care about the most basic concepts of business economics, and politicians who benefit from pandering to minimum wage earners.

Current government policies are designed for purposes other than to help people escape poverty; therefore government needs to start encouraging job creation so that people in poverty have better opportunities to take control of their own lives and work their way out of poverty.

Returning America to the land of opportunity it used to be, where people were able to go as far in life as they were able, should be President Obama’s major goal.

"Living wage" mentality reflects misunderstanding of business reality

Fast food workers in seven cities were on strike last week demanding a "living wage" of $15 an hour, more than twice the $7.25 they currently make. Empathy aside, this expectation is a fantasy.

Every job has a value, but it is based not on what the person who has the job thinks it should be worth, or what sympathetic observers think it should be worth, but on its role in the business.

How important is the job to the business, compared to other jobs? Are other people who can do the job a scarce commodity, or are there thousands of them? Some jobs require substantial training, while others do not, and individuals with the required training deserve higher pay than those without training. Minimum wage jobs in the fast food industry require no formal training; the worker can learn on the job, and while the worker is learning to do the job satisfactorily, the boss endures lower-than-necessary productivity.

Who exactly works for the minimum wage? These jobs are entry-level work intended for people just getting started in the workaday world, like students trying to earn a little money while pursuing their education, or people with little or no skills or experience looking to get some skill and experience. About half of the 1.6 million minimum wage workers are under 25 years of age. The minimum wage is not intended to be, and cannot be, a “living wage.”

The minimum wage is, indeed, a low wage, but most of those workers get a raise in less than a year, and there are fewer of them today than in the past. The number of people making at or under the minimum wage today is 28 per 1,000 wage and salary workers, while in 1976 there were 79 per 1,000 wage and salary workers.

Most employers want the best workers they can find, so if most workers produce 10 of something an hour and Joe can produce 12 an hour, or if Mary’s work is of higher quality than other employees, the boss is likely to give them a raise to keep them on staff.

For people in minimum wage jobs with few or no skills, demanding their salary be doubled to a "living wage" is somewhat akin to high school students demanding they be given a college diploma. And anyone earning minimum wage that is unhappy with it can go look for a better-paying job. If they can't find one, do their best at the current job, and get some training that will qualify them for something better.

An organization calling itself Socialist Alternative illustrates graphically the failure of a “living wage" minimum wage in an article titled "Profit is The Unpaid Labor of Workers."

"Hypothetically, lets assume that our job pays $7.50 an hour and our boss wants us to work for twenty hours," the article says. "At $7.50 an hour for twenty hours, that’s a total of $150. In that same period of time, however, the work we do will probably make $300, $400, or $1000 worth of pizza."

And here's where it gets good: "What does this mean? Just for arguments sake, lets assume we only create $300 worth of pizza. After our boss gives us $150 for our week’s worth of work – meaning our own labor essentially pays our wage – he is left with an additional $150 that he did not work for."

There’s a brilliant bit of insight hidden in that paragraph: "our own labor essentially pays our wage." To the socialist mentality, the only cost of running the pizza parlor is what the boss pays the pizza maker. Everything else – flour, sauce, pepperoni, cheese, insurance, rent/mortgage, electricity, water, sewage, trash pickup, taxes, fees, etc. – the boss apparently gets for nothing, and the money collected for the pizza that is not paid to the pizza maker is ill-gotten gains.

The "living wage" strikers similarly do not understand business, and what happens when wages go up. Raising the minimum wage requires a commensurate raise in all wages, to avoid causing strife among the other workers, and that means price increases that make the business less competitive. That could lead to staff cutbacks or ultimately closing the business.

The strikers and the socialists fail to understand and appreciate the investments of the owner(s), who may have mortgaged their home to finance the business, and managers of larger businesses, who usually have spent years in training and working to get where they are, perhaps starting as a minimum wage employee themselves.

Owners get whatever is left over after everyone else – employees, venders, lenders, taxes, etc. – have been paid. Often, particularly in the beginning or during hard economic times, that is little or nothing. And, few employees work as hard as the owner of a small business, and particularly a new business, yet the Socialist Alternative begrudges them making a decent return on their investment of capital and time.

It’s easy to criticize the boss from the sidelines. The best course for these critics would be their forced entry into the business owner’s world. At their own expense, of course. They would undoubtedly see things differently in short order.