Raising the Minimum Wage is not Long-Term Benficial

Watching cable news tonight Bill O’Reilly cited a CBS/NY Times Poll from May 28.  The Poll’s minimum wage question reads like this:

“As you may know, the federal minimum wage is currently $7.25 an hour. Do you favor or oppose raising the minimum wage to $10.10?”

The answers are 71% Favor and 26% oppose.  Bill closed the segments saying “Talking points favors raising the minimum wage.”

In 1985, at 16 years old, I started working at a McDonald’s for $3.33 per hour (the minimum wage at that time.)  It was shortly thereafter boosted to $4.25/hour and, since I’ve been able to pay attention, has been a favorite political drum of both parties (heralded primarily by the Democrats but also joined by the squish “Me-too” choir, the Republicans.)

The minimum wage is now at $7.25/hour, and even higher in some states and municipalities.  The National Conference of State Legislatures has a table itemizing the Minimum by state (click here to see NCSL table.)  Most states are at the Federal level and others are randomly higher.  Some municipalities such as Seattle and Los Angeles are at $15/hour.

The argument for a higher minimum wage is always to help the poor parent of 4 trying to raise their family on minimum wage for the last 10 years. This is an argument tossed about by Washington Politicians and Media Center news anchors.

Left-Leaning MSNBC went so far as to find “that one person in the whole country” making minimum wage the last 20 years of his life at McDonald’s (how Stereotypical can you get?) when reporting:

Context of the report and these studies: both organizations have a subjective interest to see the Minimum Wage raised.  View them with healthy skepticism.

An interesting tid-bit from the Wall Street Journal back in 2013 stated the following:

… a number of unions in the service, retail and hospitality industries peg their base-line wages to the minimum wage.

So realistically the minimum wage is not about the “poor” at all (pawns in an emotional tool in this game of chess. )  It appears the unions are base-lining their pay-grades off the minimum wage.

SIDE NOTE:
Someone needs to maybe help the poor gentlemen cited in the MSNBC report to get an increase in his wage.  After 20 years he should move up in pay via merit increases, Cost of Living Adjustments, or hopefully even promotion. Something!

So how is this not beneficial?

What is the harm in giving everyone a $2.50/ hour raise?  This is inherently inflationary in nature, eventually spreading to the higher paying industries or businesses.  Everyone’s spending power loses strength and this even causes our economic activity to shrink as we are unable to spend as much in as many places as before.  The process is gradual so people don’t directly associate it with a bump in the minimum, but there is direct causation.

  • Cost of goods and services will naturally increase as businesses look to cover costs
    Businesses don’t eat the extra costs; they pass it to the consumer in the form of higher costs.
  • Businesses always try to do more with less.
    Cut staff
    reduce operating hours
    price increas
    es Running a business is about the bottom line.
    Reactions to labor cost increases ultimately makes fewer jobs available.
  • Our Pay (Yours and Mine) will not be increased accordingly.
    Our discretionary spending power is diminished – covering higher costs of “normal” activities without a pay increase impacts what and where we spend.

A Forbes magazine article from March 2015 (this year) lists some things happening Seattle since the $15/hour minimum has been set as of 5/1/2015:

  • “… a rising trend in restaurant closures.”
  • “… shut-downs have idled dozens of low-wage workers,”  (higher unemployment))
  • “It’s not a political problem; it’s a math problem.”

By Seattle increasing the minimum wage, suddenly people like myself making more than the minimum wage, but not independently wealthy, will feel the pinch and eventually demand a higher salary (current job or moving to a new company) for our skill.  What that means is higher costs in non-minimum wage industries such as Auto, Electronics, clothing, durable goods, insurance … you name it.

Conclusion

Minimum wage is being pushed by an agenda, not by concern for “the Poor.”  Removing emotion from the issue and seeing the simple math problem reveals a problematic impact on our economy in the longer term.  Once other industries increase their salaries meeting employee expectations the costs will naturally rise in those industries bringing back he argument we need to raise the Minimum again.  Its a viscous cycle but has an easy answer: Don’t raise the minimum.  Let people grow out of it, because they will.

One of the articles above claimed 40 hours a week at $7.25 is approximately $15,000 / year income.  Raising it to $10.10 puts them into the $20,000 / year range.  Why not just make the minimum $100/hour and be done with it?  Wouldn’t $204,000 a year be compassionate?  If the government can arbitrarily mandate $10.10 (To make it more fair) then just go for the gusto and stop screwing around.

Our country’s economy has been able to equalize around new Minimum Wage numbers after a period of time, but combined with an already bad economy (which our government and media currently will not admit) it can really bring this already slow Obama Economy to a halt.

Bill, Bill, Bill

{Palm to forehead}

As for Bill O’Reilly supporting the a Minimum Wage increase,  I see a split view:

  • A Harvard educated MBA should have a decent background in economics to know the deleterious affects increasing operating costs will have on the economics of the affected region.
  • But then again, a Harvard educated MBA usually endures a rigorous left-leaning lecture circuit.  Some of that probably found a home in his philosphy.

Bill O’Reilly should give himself his own “Pinhead award” on this issue.

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