Friday, March 03, 2006

Minimum Wage Amendment Potential Disaster

If the proposed consitutional amendment to raise the minimum wage, and also keep raising it automatically with inflation, ever becomes law the results for our economy will be disastrous.

If raising the minimum wage by a dollar an hour is good, then why not do even better and raise it by twenty dollars an hour? Why, it would be a socialist paradise with the least of us earning over $25 an hour!

Of course I am being a bit sarcastic, but I do it to illustrate a point. Everyone knows you can't raise the minimum wage that high- they know it would cost jobs and put companies out of business. They know this when the min. wage is raised high enough to make its effects obvious, but for some reason there are those who will not grasp the plain fact that the same thing occurs with a smaller wage increase. Less people are hurt, but they are hurt. Fewer businesses are sunk, but some are sunk.

A short refresher: Government cannot legislate around the laws of economics. Setting a higher minimum wage will invariably have undesirable consequences- to wit INCREASED UNEMPLOYMENT. Arkansas will lose jobs to surrounding states and other countries who understand economics better. And it won't be only the lower end jobs that are lost.....

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23 Comments:

Blogger Mark Moore (Moderator) said...

Say a business employees one hundred workers at the minimum wage of $5.15 an hour. Each worker nets the employer 50 cents an hour. The costs include two formen who make $20 an hour and a plant supervisor who makes $30 an hour.

If the minimum wage is raised to $5.85 an hour instead of each worker making the owner 50 cents an hour they each now cost him 20 cents an hour. He must either a) lay off the least productive employees, or b) raise his prices, or c) shut down the factory.

Option "A" may not be possible. The higher the minimum wage is raised the more likely it is that NONE of his employees can make him a profit, or that the number is so few that his overhead will eat up the profits at his new and reduced volume.

Option "B" is often not possible either, because the people who run India and China understand that minimum wage laws are idiotic and unburdened by them they will make the same product cheaper- and Mr. Scott's Wal-Mart will drop the American supplier in a nanosecond once that happens.

That leaves option "C", which is what is happening right now to America's industrial base. Notice that when the business shuts its doors it is not just the minimum wage worker that loses. The foreman and the plant super also lose their good jobs, and the owner loses his great job.

I know people are hurting, but is causing them to lose their job and go on welfare the answer? Of course not. A lot of people do not have the attitudes, habits and skills needed to be worth anymore than $5.15 an hour. They don't need a change in mandatory wages, they need new attitudes, habits, and skills. They need to learn to serve people better.

7:48 AM, March 03, 2006  
Blogger Mark Moore (Moderator) said...

Let me add to the above scenario: The 100 minimum wage jobs are lost, the decent paying foremen jobs are lost, and the well-paying supervisor job is lost.

And because all that money is now taken out of the local economy, OTHER businesses suffer. Maybe your job is lost, or at least your income reduced. It has a ripple effect far beyond the original lost jobs.

7:52 AM, March 03, 2006  
Blogger Harvey Edwards said...

It has an even more catostropic result in the Delta. I use my old example of Marion Berrys hometown of Gillett. First take a drive there and look for a job. Tell them you will even sweep floors since you have a family to feed. There are no jobs because for decades the leaders have kept them away. So maybe you can end up with a local job fifty miles away. Of course it will be the mills since you havent had the opportunity to prepare for better. Better just doesnt exist. The Mills appreciate the commuting since it means they have a regulated and inexpensive workforce. Now the only other disservice you could do to these folks is set a minimum wage higher. Like Mark said there would be smaller shops closing down and the mills since they control the jobs would trim the fat. The folks will not see the growth of our economy catch up until there is solid efforts to provide many opportunities. Currently the Mills dont welcome outsiders.
I constantly get exceptional job offers. The problem, they all require moving , Last week it was as a metrologist at an auto plant in South Carolina, see they know how outside business helps their economy. it was for 20-30 dollars an hour and it was a straightforward job. Last Month I turned down a field Service Engineer Job at 95.000 salary. It too meant moving and travel 75% of time. these are but two examples. Now this burns me up each time I think that we could allow the Mills some competition but dont.. The companys would be happy to set up here . Our Representatives just dont want it to happen. The bottom line I am staying Put in My home and will fight in or out of office to make things happen.
Just one more example I thought I had it bad. A friend of mine living in Gillett and not getting hours on the farm was in sheer panicked depression of his families financial situation. He asked me if I could help him find a credit card consolidator for his two maxed out cards that he had used sparingly to feed his family during the hard times (thats everyday) I asked for a detailed account of his bills so I could try to find some help. You would think he was in debt in the many thousands. It added up to two thousand dollars. This is not enough for consolidation help but it is more than he has the resourses for.
any suggestions from the elitists that have caused this? Bring em on.

7:28 PM, March 03, 2006  
Blogger Mark Moore (Moderator) said...

If raising the minimum wage by a dollar an hour is good, then why not do even better and raise it by twenty dollars an hour? Why, it would be a socialist paradise with the least of us earning over $25 an hour!

Of course I am being a bit sarcastic, but I do it to illustrate a point. Everyone knows you can't raise the minimum wage that high- they know it would cost jobs and put companies out of business. They know this when the min. wage is raised high enough to make its effects obvious, but for some reason there are those who will not grasp the obvious fact that the same thing occurs with a smaller wage increase. Less people are hurt, but they are hurt. Fewer businesses are sunk, but some are sunk.

11:11 PM, March 06, 2006  
Anonymous Catfish said...

"If the proposed consitutional amendment to raise the minimum wage, and also keep raising it automatically with inflation, ever becomes law the results for our economy will be disastrous."

Okay, I think there can be honest disagreement about the theory of government imposed minimum wages, which have been national policy for 70 years. However, I'm not convinced that paying workers more will have disasterous results for the economy.

CEO salaries and benefits have grown significantly more than the minimum wage in the last nine years. Has this led to all the dangers predicted for raising a worker's wage by $1 an hour?

If raising a worker's pay by $1 an hour will be so harmful to workers, does your argument also contemplate that workers would receive great benefit from cutting their wages by $1 an hour?

8:46 AM, March 11, 2006  
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