Tuesday, October 25, 2011

Oh No! Not Again...

This from an article on MLive yesterday under the title: Expect more pressure to raise minimum wage as percentage of those receiving it increases.

Anyone earning minimum wage in Michigan makes $296 a week for a 40-hour week, or $15,392 a year. Federal poverty level in 2011 is $10,890 for a single person and $14,710 for a couple.

Nationwide, the Bureau of Labor Statistics says the percentage of employees working for minimum wage doubled from 2009 to 2010, going from 3 percent to 6 percent. The percentage of men receiving minimum wage or less nationwide rose last year from 1.9 percent to 4.5 percent

Some states are aggressively raising their minimum wages, led by the State of Washington, where the minimum wage will go up 37 cents on Jan. 1, 2012, to $9.04 per hour. Ohio is also raising its minimum wage Jan. 1 from $7.40 an hour to $7.70 per hour for non-tipped employees and $3.85 per hour for tipped employees, plus tips.

As the Occupy movement gains more supporters across the country expect more more discussion about raising the federal minimum wage. The Center for Economic and Policy Research is already arguing that if the minimum wage had kept pace with the economy, it would be almost $20 per hour.
Minimum wage laws fly in the face of liberty even though they are a tyranny based on benevolence. The results of minimum wage laws are always of the "unintended consequence" variety, while their motivations are of the "for the people" ilk.

While the article itself is rather straight in its presentation, it is in the comments that one can find the progressive favor for such intrusion into the private sector.

Here are facts that are rarely disputed among economists. First, since minimum wage increases are arbitrary and not based on increased productivity or profitability, the added cost of higher wages are inflationary. In other words, if a company has to absorb an additional $1,000 a week in payroll and other employment costs, in order to simply keep its head above water, the business must raise revenues to offset the new $1,000 in costs and must toss a few more dollars to the profit side in order to keep margins healthy. (Don't believe me on that last part? Try to get a commercial loan today with poor margins.)

But, what if a company is unable to get customers at the higher rates? (This occurs often to businesses whose products are more discretionary in nature.) Those businesses, unable to raise the additional $1,000 per week in receipts, must find other ways to make ends meet. The easiest way to do this is to lay off employees, and the first jobs to go are typically those that can be done with lower frequencies and lower skill labor. A business can have the back room swept less often, can make customers wait a bit longer in line before a cashier is available, or can try and handle the lunch hour with a smaller wait staff.

Each job has a price point. At a certain cost they are worth doing. At costs above this point they are not worth having accomplished as often or at all. By raising the costs of employment, more and more jobs are no longer worth doing at the prescribed rate.

The fact is, whenever the minimum wage laws are changed they increase unemployment among unskilled and new-to-the-marketplace workers while also offering an inflationary component to the entire economy. Those workers who hold on to their jobs gain nothing over the long term because their larger checks must purchase more expensive goods and services, while those who have been laid off lose big at the outset.

Another unintended consequence of higher mandated costs is the shifting of commerce from high overhead mom-and-pop operations to larger corporate behemoths such as Wal-Mart and Home Depot. While all progressives hate warehouse stores for the small businesses they supposedly destroy, they have no problem with encouraging the very sort of regulations that place a decided disadvantage on the backs of these smaller stores.

The minimum wage war is something that is fought every several years at the Michigan or national level. Foolishness has often been defined as employing the same failed solutions time and time again while each time expecting a different outcome.

The results of an increased minimum wage in Michigan are as predictable as the effects of gravity. We know that they will increase unemployment among the most vulnerable while also adding to inflationary pressures and, in addition, will put smaller employers at a disadvantage against low overhead businesses. No wonder it is in such favor among progressives.

Thank you sir, may I have another!

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