Minimum Wage = Fewer Jobs

 

MINIMUM WAGE = FEWER JOBS!

Written by Jim “Gymbeaux” Brown, March 5, 2021

Anything appearing in BLUE is a link to a web site

 

DISCLAIMER:  I am not an economist but I have on occasion demonstrated limited “common sense.” 

President Joe Biden said he was going to raise the minimum wage to $15.00 an hour and so far, he is attempting to deliver on that promise. 

If you read ONLY the headline of that story, you might be like most Americans and declare, “It’s about time.”  But few if any headlines tell the entire story yet, Americans have become so accustomed to headlines and soundbites, few if any, actually read the entire story. 

$15.00 an hour in cities like New York, Los Angles, San Francisco, Chicago, etc. may sound like a great idea because the cost of living in those cities are so high.  But what about cities like Bogalusa, Morgan City, Pearl River, and even New Orleans where the cost of living is NOT at the same level as cities like New York?  What about the minimum wage in those cities?  Is the Federal Government going to MANDATE, REQUIRE, PENALIZE, employers in Pearl River, Louisiana by establishing how much they EACH MUST pay their employees as a starting salary regardless of skill levels and actual job performance?  Is that really what Americans want to see happen?  Is that what YOU really want done unto you? 

When did it become a common acceptance that a minimum wage was designed to support a family because that is the argument I constantly hear when people attempt to justify the increase?  I remember growing up as a kid that minimum wage meant that people like me were hired to perform minimum skilled jobs at a minimum wage because I had, are you ready?  MINIMUM SKILLS!  I also understood that as I became more proficient and was assigned more and more tasks to learn and perform well, my employer would occasionally raise my wages.  For the record, my first job in 1957 paid 60 CENTS an hour.  I was a stock boy in a local drug store.  

What would have happened to my $1.20 per hour wage that I began earning as I proved myself IF the government required my employer to pay all new employees $1.20 per hour, the same that I had started to earn through my job performance?  Would my employer raise my hourly wage?  Or would my employer just ask me to remain at the $1.20 per hour or I could leave the work place and look for work elsewhere?  Could or would my employer afford to pay all the new people $1.20 per hour and increase my pay to say $1.35 an hour to compensate me for something that I had already earned prior to the new minimum wage imposed on my employer? 

If an employer is mandated to raise their starting minimum wage to $15.00 an hour, employers will have no choice but to either RAISE the price they charge to consumers for their products and/or services or eliminate the number of employees they hire JUST TO BREAK EVEN WITH WHAT THEY NOW HAVE!  If an employee reduces the number of employees, that probably will adversely affect the services and/or products they sell which will adversely affect their profit margins.  THE EMPLOYERS OF AMERICA WILL LOSE EITHER WAY!  More importantly to people like Joe Biden who DEPEND upon tax dollar revenues coming to the Federal Government, fewer employees will equate to less tax revenues. If businesses were to close because of excess costs of doing business, that too means less tax dollars coming into the Federal Government.  AGAIN, EVERYONE LOSES.  And what about the teenagers and also the senior citizens who have come to depend on using minimum wage jobs to supplement their incomes?  They too are hurt. 

In short, wages should be driven by the market place, NOT THE FEDERAL GOVERNMENT.  If an employer doesn’t want to pay people what they are worth based upon the work the employer demands they perform, people should choose NOT to work there and go elsewhere for work. 

REAL LIFE SITUATION:  The year was 1979 and the oil and gas industry in Southern Louisiana and Texas was booming.  I served in the U. S. Coast Guard at the time this situation occurred.  There was a huge demand for ships designed to service the offshore oil producing platforms.  They could not build the ships as fast as they could be sold.  What happened?  The MARKET took over.  Shipbuilders would put probable ship buyers on waiting lists for their ships to be built.  What happened next?  Ship buyers who were low on the list realized that they could “buy” their way to the top by offering money to buyers who were higher up on the list to switch places, much like what happens every April with the National Football League Draft.  If the DEMAND (MARKET) for the ship to be built exceeded the additional cost of moving up the list, the ship buyer determined that moving up the list was a prudent business decision, paid the money and moved up the list and received his or her new ship faster than had been expected. 

During this same period WELDERS became a premium skill trait.  Welders were desperately needed in shipyards to build ships and also in yards where the offshore rigs were being built.  Housing at that time in the Morgan City, Louisiana area, where I was assigned by the Coast Guard, was non-existent.  I eventually rented an apartment in the New Orleans area and drove U. S. Highway 90 back and forth from New Orleans to Morgan City EVERY DAY because I could not afford to buy a home nor could I find a home that I could afford to rent on my Coast Guard salary anywhere near Morgan City.  Other factors entered my decision to locate my family in New Orleans and I chose to drive the almost 100 miles one way, every work day. 

On my daily commute I would see full size road side billboards advertising for Shipyards needing welders and the billboards would include the hourly wage being offered to anyone signing up to work.  The very next billboard I would see would have a similar wage crossed out with a slightly higher wage roughly painted over.  It was that way the entire distance of my drive to Morgan City.  It was a case of SUPPLY AND DEMAND where the MARKET determined the wage structures. 

This is a PERFECT EXAMPLE of “the market” dictating what wages would be paid to people to do specific work.  The wages were determined by what the market would bear NOT by some politician sitting in Washington DC.  

Another PERFECT EXAMPLE of “the market” at work, occurs every day in every locale across the nation in the real estate market place.  People have bought and sold homes for hundreds of years.  How much is a home worth?  I can tell you by my own experience that in 1979, homes in the Morgan City, Louisiana were off the chart as compared to other areas of the country.  This was “the market” affect on the value of homes.  Were they actually worth as much as people paid for them?  They were to the people who bought them.  They were considerably higher than an equivalent home located in the New Orleans area just 100 miles away.  The point is obvious and well know to most people but not apparently to Washington politicians, THE MARKET BEST DETERMINES VALUE, not artificial price controls (minimum wages) set by politicians in Washington, DC. 

I don’t fully understand how “rent controls” are used in the New York area but my limited understanding is that THE government determines what is to be a "fair rent” for an apartment as compared to what the market could or would bear.  As real estate values in the New York City area began to significantly rise because of the increased commercial activity, rental values would also necessarily rise but NOT if the government imposed its control through “rent controls.”  Why would anyone buy a unit to rent if the government controlled what they could charge for the unit?  A prudent investor wouldn’t.  Property owners who already own the units are then stuck with the units collecting lower than market value rents and cannot sell because the incoming rents would not justify a property investor paying a high price for a unit that could not, by regulation, pay for itself through higher rents collected.  Dah!!!!! 

IT'S THE MARKET STUDPID!   It IS the “market” that should determine values and wages, not the government!!!!  How difficult is this to understand.  If someone never studies how businesses operate, they would have no understanding of how little profit is actually made by a great many businesses.  When one of the elements involved in the cost of doing business (minimum wages) increases, owners are left with FOUR choices.  ONE, they literally eat the losses they will incur thus lowering the profits they earn.  TWO, they hire fewer employees or they reduce the number of hours the employees work.  THREE, they pass the increased costs of doing business on to the paying customers.  Or FOUR, a combination of all three choices.   What would the most PRUDENT business decision be when the government increases your cost of doing business?  In my world, it would be to reduce the number of employees so you can afford to pay the increased wages to the fewer employees you have remaining on the workforce.  It may also mean using automation instead of humans to do the work which we have seen occur in fast food restaurants. Ultimately that would most likely result in less customer service to potential paying customers; not a good outcome.  If I keep the total number of employees and pay them the government mandated wages, I would be forced to increase the price of my product or service to the paying customers, again not a good solution for future business profits.  As a business owner I lose no matter what choice I make created by GOVERNMENT INTERVENTION IN MY BUSINESS OPERATION!!!!! 

The ONLY people, certainly not you, who think that it is a good idea for the GOVERNMENT to raise the minimum wage or get involved in establishing wages at all, are people who have come to rely upon the government for their income or benefits.  GOVERNMENT INTERVENTION leads to more and more SOCIALIST policies dictated by “the government.”  The more such policies are put into effect, the less freedom everyone enjoys in their daily lives.  Government Intervention, as F. A. Hayek so aptly describes in his book The Road to Serfdom, (written in 1943) leads to Socialism and Socialism eventually leads to Communism, there is no other choice once a country starts down that road. 

Interesting question.  If you believe that the government should REQUIRE an employer to pay an employee a minimum wage, what would keep that same government from establishing a MAXIMUM limit on what a person could earn.  What would that do to CEOs, Hollywood Elites, Professional Athletes, sales people earning commissions on their sales?  For example, would a professional kicker in the National Football League be permitted to earn in excess of 7 Million Dollars for a job that takes less than 5 to 10 minutes of playing time in each game played?  Or, how much money would be considered to be too much money for a very successful real estate agent to make selling real estate?  Where is the government mandate for that grossly OVERPAID individual?