People generally believed that the minimum wage helps the poor but it may just hurt the people it is intended to help. We should all take a minute to think about it.
If we can simply require pay levels, why don’t we just make the minimum wage $20 an hour? Imagine that. No one in the country would earn less that $40,000 a year. The problem of course is some jobs are not worth $20 an hour. If the minimum wage were set at $20 an hour, millions of jobs would just go away. Any job that is only worth $5 an hour would be illuminated or automated. If the minimum wage were $20 an hour how much do you think a meal at McDonalds would cost. Would you pay $17.50 for a Big Mac Value Meal? Fast food would go away or the jobs would be automated. Either way the jobs would be gone. Do you think people are better off with a $5 an hour job or none at all. The same thing is also true, albeit to a lesser degree, when the minimum wage is moved to $7 an hour. If the job isn’t worth $7 an hour it goes away. If it can be automated for less than the equivalent $7 an hour the job will be gone.
Automation doesn’t just happen in big heartless companies. Many jobs are being automated now; bank tellers replaced with ATMs, Receptionists are replaced with automated phone systems. Lets take a look at automated grocery store checkouts. The bar code scanner has made checking out so much simpler that we can do it our selves. If the minimum wage goes to $7 an hour don’t be surprised to see those automated checkout lanes offer a discount (in truth it will be the rest of the prices going up to pay for the wage increase). Is it worth paying someone $7 an hour to swipe product by the scanner. The lanes that have people scanning your stuff will become more expansive. Wouldn’t you take a discount to scan your own groceries? Next time you see one of those self-help checkout lanes think about the minimum wage.
The worst part is it isn’t rich corporate head whose jobs would disappear, it is the very people the minimum wage is suppose to help. If they haven’t been fortunate enough or don’t have the capacity to get a good education then they can’t get a job for $10 or $15 an hour. Raising the minimum wage could mean eliminating the only job they can get. Say goodbye to many “first job” job opportunities.
The usual response to this is that the companies should have the compassion (or however you want to phrase it) to just pay these people more. But companies function just the way we do. You pay for what a product is worth not what the seller deserves. If you found out your gardener had a Doctorate in physics or had a heart rending hardship you wouldn’t just start paying them $40,000 a year to cut your grass. You can’t afford to live your life that way and companies can’t afford to function that way either.
Aaron Feuerstein became famous when he kept workers on the payroll after a 1995 fire destroyed his company, Malden Mills, main factory and they couldn’t produce product. The media loved it but the company of course couldn’t afford it and eventually declared bankruptcy…I know…you never heard that part on the news. Luckily for the workers the people who bought the company and brought it out of bankruptcy kept it in the area. His folly, however well intentioned, could easily have created an opportunity for competitors to gobble up the name and customer base and eliminate or move the production jobs over seas. Some people believe he did it for the positive media attention but even if he meant well his short-term compassion could have led to long-term hardship for the workers. They are very lucky they didn’t lose their jobs permanently.
The steel industry is another example of what happens when you force a company or industry to pay more for a job than it is worth. Steel unions forced high pay for even simple jobs. That forced the industry out of the country. Airline industry pension funds are now showing strains for the same reasons.
The same thing can happen on a much smaller scale. If you manage to talk a future boss into paying you a lot more than that position is worth don’t count on it being a long-term career move.
The impending minimum wage increase will be cause for celebration among affluent politicians but it will just end up hurting the youngest and least educated among us. If you can understand this, if this makes any sense to you, pass this blog along. Email it to friends and family or just explain it to them yourself. If we reward politicians for empty or even damaging legislation because it sounds good they will keep passing bad laws.
Cuddos to you for the more open ended thinking…you are on to something. If I may, for edification, allow me to point out a few things that may bring this into a bigger picture (or at least give a different perspective). We (as consumers) tend to be greedy, we want more, more, more for less, less, less. To that many of you have just said “well there’s nothing wrong with that, I want the most for my money”, but not entirely! It’s not about rather a service or product has a correlative cost to value ratio to us, it’s “if I spend less on everything I buy I can have more of everything”. Corporations and competition drive prices down and thats as deep as most of us see, and are happy with it, as we head out in search of the lowest price for whatever it is we wish to consume. The cost is that the American jobs cannot produce the products at any where near the competitive price of overseas labor. It doesn’t matter if you pay an American worker $7 or $27 when labor in India and China is less than $1. Well that’s the Corporations end of what our own greed is doing to us.
God Bless, keep thinking!
The govt end, and minimum wage is the other end. Again we want more, more, more. So your politicals wishing to keep their careers moving upwards give us what we want (instead of what we need). They issue minimum wage increases, put more “money” into circulation to support the same (it has to come from somewhere). What could be better, we’ve got MORE money right? But where did that money come from? Ever heard of inflation? Occuring when the govt places more currency into circulation than is equal to our GDP. Hence the value of the dollar decreases a little more, which by the way it has lost over 97% of it’s buying power since being introduced in the twenties and being mandated as tender in thirty three.
Have you ever seen the snake that is eating it’s own tale? Well, that’s what we’re doing…being devoured by our own greed.
So maybe the next time you go to the store, instead of going to WalMart, spend that extra dollar and visit your local butcher, or a Ma & Paps if there’s one left in your area, and the next time you hire a Contractor spend the extra hundred bucks instead of hiring the mexican crew, he’ll probably spend it at the butchers anyway
Comment by Greg — January 15, 2007 @ 6:04 am
Thanks for the comment and the alternative perspective Greg. Hope to hear more from your perspective in the future.
Comment by contrarythought — January 16, 2007 @ 8:41 pm
As far as legislation goes, I think your painting the picture too narrow. Minimum wage laws may indeed have some of the negative effects you described by themselves, but with the additions of other regulations on corporations they can be effective. How can minimum wages cause businesses to move overseas if the government limits outsourcing? How can you say that it’s bankrupting companies when CEOs make millions and millions even while the companies are in so much “financial trouble?”
Comment by abyssalleviathin — January 22, 2007 @ 10:53 pm
Maybe I will have to devote a whole post to the government controlling what board of directors can pay their executives and controlling the means of corporate productions. I assume you would have the government pass legislation regulating companies ability to automate in that it circumvents the minimum wage the same way outsourcing does.
Comment by contrarythought — January 23, 2007 @ 8:14 pm
Minimum wage, banning outsourcing, capping CEO packages, etc. The real question here is why are liberals so hell-bent on collapsing the American economy??
Comment by Valerie — February 3, 2007 @ 2:05 pm