Day by Day



Friday, January 26, 2007

Minimum Wage

The past couple of weeks have had a bit of discussion about the Democrats wanting to raise the minimum wage.

Most of the objections raised by columnists, bloggers, and talk radio is that the minimum wage is irrelevant. They quote minor portions of the population who actually earn the minimum wage, and therefore, the federal government mandating a raise is an example of swatting a fly with sledgehammer.

I disagree. The minimum wage is relevant. Sadly, most people have missed the reasoning why. Either it's been a long time since they've earned the minimum wage, or they're salaried, or they're not connecting the dots.

The minimum wage is relevant because of the margin that it sets. The wage has been at $5.15 per hour. True, few people earn $5.15 an hour. However, what about someone who's earning $6.25 per hour? They've been told that they are of more value because they're earning $1.10 above the minimum wage. If you raise the minimum wage to... say... $6.00 per hour, that person's wage value has just been diminished by 85 cents per hour. And if that person has any sense at all, they'll demand an equal raise to preserve their wage value. So, now that person will want to be paid $7.10 per hour. Others will want to see their wages raised, too. Even salaried workers will quickly do the math (assuming they didn't go to government schools) and they'll discover their decreased wage value and want a raise.

You see, it's not the minimum wage workers who will cause the inflation or possibly reduced jobs. It's the domino effect. The owner of Billy Bob's Burger Barn will need to either eliminate a worker or two, accept reduced profit (or GASP!, a loss), or raise prices.

But, that's not all that the Burger Barn owner will be affected by. Supplies have to come to Burger Barn. The suppliers have workers, and those workers are also using their calculators to determine what their new wage should be. The trucker bringing the goods to Burger Barn isn't lost on this, either. Plus, he has to pay higher fuel prices that the Gas n' Go station is charging because they had to raise wages.

It ripples throughout.

And THAT's why raising the minimum wage is bad. Because, by the time all is said and done, whatever worker is earning the minimum wage is spending their newfound raise (and quite possibly, MORE than the raise) on the higher prices at Burger Barn, Gas n' Go, and other parts of their life. Everything will be more expensive, and so the minimum wage raise will have helped no one, least of all the minimum wage earner it was supposed to help.

1 comment:

MissBirdlegs in AL said...

Extremely good reasoning. It will play havoc with small businesses, whose customers already whine every time there's a rise in product fees. I know whereof I speak. :)