Arguments Against Minimum Wage Hikes

This is by no means a formal thesis on my stance against increasing minimum wage. Sorry, no statistics, no numbers, no conclusive studies from universities. Just reasoning, common sense, and personal experience.

As always, I have to give a stupid disclaimer. No, I do not think that everyone who earns minimum wage is an idiot, or lazy, or a bad person, or deserves a shitty life. That’s not my opinion. But it doesn’t affect my stance on the issue one bit. Sorry, pulling no punches this time.

Why am I against increasing the minimum wage? Read on.

Employees are Expensive

When people think employment they think of words like company, enterprise, corporation, which all have negative connotations and stir up imagery of monstrous evil entities with gazillions of dollars just laying around. I work for a corporation, and it employs two people, my mom and me.

Expensive personFor many businesses, labor is a HUGE expense. I don’t know percentages. And it doesn’t matter what percentage of operating costs are for labor, but it’s big, and relevant. How do I know? Go to any small mom n’ pop business in your local neighborhood. How many people do you see working there that aren’t owners? 1? 2? None?

If labor costs were the drop in the bucket that Wage Hikers make them out to be then every business on Mainstreet would be flooded with employees. But they aren’t. Because employees are fucking expensive.

And were not just talking their hourly or salary, but also their benefits, their PTO, workers compensation, and then paying unemployment once they no longer even work for you. Then, you add on top of it that employees these days are usually lazy and check their social media accounts for 4 hours, spend an hour in the bathroom, and do a half ass job the remaining hours, you realize that you’re paying your employees 8 hours for 2 hours of work.

Labor Costs Outpace Consumerism and Revenue

The big “counter attack” to the point above is “Well if employers pay workers more, then they can afford to buy more and then more people buy from that business and the business makes more money, and so then it all works out.

The premise is horrible for a multitude of reasons.

  1. It assumes that business revenue will increase. Big assumption. Higher labor could mean higher product costs, which could very well result in less customers, less sales, and therefore less revenue.
  2. It assumes that business revenue will increase immediately. Labor is an upfront cost. Meaning even if business will improve weeks, months, or years later, business can’t write I.O.U.s to their employees and wait for that increased revenue to come in. I have to pay my staff NOW. For many businesses they simply do not have money laying around to pay their workers more. It’s not a matter of fairness or equality. It’s a matter of accounting and budgeting.
  3. It assumes that business revenue will increase for every business. Even if certain businesses do see an increase in revenue, it will not be all businesses. The only businesses that will do better are those which hire low wage workers and whose consumer base is also low wage workers. So for example, fast food joints and movie theaters. Businesses that hire entry level workers but attract well-to-do clientele will not benefit from this at all. So the majority of businesses that cater to homeowners, the housing industry, contractors, real estate, will see their labor costs go up without a coinciding increase in volume or revenue.

People are Hired Based on Merit, not Circumstance

Yeah, yeah. Such-and-such lady is a single mom with two kids and she works four jobs and still can’t make a decent living at the current minimum wage, feel bad, yada yada.

And? Since when are people paid based on their circumstances, and not on their merit? What difference does someone’s sob story make? If and when I ever hire someone, the only thing I will care about is what can you do for me? How are you going to make me more money? Why should I pay you X amount? Now prove it.

If anything else mattered, people wouldn’t send in resumes and applications when looking for a job. Employers would ask candidates “How shitty is your life?” and then pay then commensurate with how shitty of a life they have. But that’s not the way it works because it doesn’t matter.

People Aren’t (Always) Worth Minimum Wage

LA recently increased their minimum wage to $15 per hour. A landslide victory for underqualified workers!

pay

Sometimes I consider hiring someone to help me out with simple tasks like writing thank you cards. My penmanship is absolute shit. I can barely read my own handwriting so that seems like a task worthy of being outsourced. Plus, it takes me forever. Why spend 5 hours writing thank you cards which is maybe $10 work, when I can writing policies which is $200 work?

Okay, so a card writer to work for three hours tops. What qualifications do they need?

  1. Good penmanship
  2. A pulse

That’s it.

Why the hell and I am going to pay someone $15 per hour to write thank you cards?

It Ruins the Pool of Candidates

Building on the previous point, not everyone is worth $15, $20, or even $10 per hour. Fact.

But having a lower minimum wage made it easier to distinguish between different tiers of workers when looking for someone to fill an opening in your business.

A $10 job attracted $10 workers. A $25 job attracted $25 workers.

Let’s say I was looking for an entry level position, again, to write thank you cards day in and day out. That’s their only job. It’s a $10 job, meaning the job is so simple that there’s no benefit to me to pay more than that, regardless of how qualified someone is. I post an opening on Craigslist and get a dozen or so people interested in the position. Let’s review the competition:

Candidate 1 – Very Overqualified: One girl is a grad student who expects $20 per hour. She’s got a bachelors in business administration and very qualified in her own right. Fair enough. She is worth $20 per hour, but my labor is not. I won’t pay $20 for $10 work. Pass.

Candidate 2 – Slightly Overqualified: This girl is still in college working on her undergrad. She doesn’t have a whole lot of experience but she’s working at it, and has good handwriting. She’s also bilingual. She’s worth $15 per hour. But again, I have a $10 job, so she is slightly over qualified. Pass.

Candidate 3 – Quality Match: Then comes some woman, 40 years old. Never graduated high school. Dropped out and had 2 kids. No college. Monolingual. But she does have great handwriting and low and behold, she has a pulse! We have a winner! But, oh shit, I forgot. Minimum wage is $15.

Now I am forced to pay someone $15, even if it is to do $10 work.

You would think this is a victory for the Wage Hikers. They think, “Aha! Andrew is now forced to hire this woman worth $10 per hour to work for him and pay her $15 per hour! Buahahahah! Our misguided plan has worked, and now low skilled people can get jobs paying higher wages! BRILLANT!

But hold on one second… that’s not exactly how it works…. Read on.

It Screws Low Skilled Workers

You can pass a law that increases minimum wage, but you can’t snap your fingers and improve the work force in a flash.

Minimum wage or not, I’m not going to hire a $10 worker for $15 per hour. For $10 per hour, Candidate 3 would have been a great choice, and she would have got the job. She’s worth $10 per hour, and I was willing to pay her $10 per hour.

Gun to my head, if I am forced to pay someone more money, I am going to find a worker who is worth it. Which means sorry Candidate 3, I’m stepping over you and moving straight to Candidate 2. True, I didn’t originally need to someone with college experience and who speaks two languages. However, if I am going spend a certain amount of money I am going to get every ounce of employee I can and sure they are worth every dime.

Example: If I was forced to spend $50,000 on a car, I would not have bought my $25,000 Nissan Xterra. I would have made sure to get a car that was worth the $50,000, such as a Land Rover, or fully loaded Jeep Cherokee.

The minimum wage changed. The candidates did not. When you raise the minimum wage, employers are going to stop hiring entry level workers and go straight to more qualified people who in their eyes would have been worth $15 per hour prior to the wage hike.

Employers are not going to suddenly stop thinking logically, and pay more money for the same labor. If they’re forced to pay better wages, they’ll get better workers, and they’ll fire their current work force without hesitation. Every candidate whose labor is worth less than the new minimum wage is going to have a very hard time finding a job and keeping it.

Conclusion

The long and short of it is that increasing minimum wage might help some people get paid more. But others will lose their jobs and either be replaced, or the employer might just decide to do without their position. It hurts the very people it intends to help. So it’s bad for employees.

It will also reduce consumption, and making hiring more difficult, so it’s bad for businesses.

Prices for goods and services will go up, so it’s bad for consumers.

When someone is bad for everyone, I don’t

 

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