Skip to content

$15/Hr? Why stop there?

May 2, 2014

So, Seattle is going to officially raise the minimum wage to $15/hr. Booya! That’s the equivalent of a $30,000 annual salary. And it helps the economy! And all of those young people that have been toiling under the current $9 bucks or so hourly wage can finally afford that new big screen tv!

So what’s not to like? In fact, why the heck are we stopping there? If $15/hr makes complete sense and drives the economy up and away, wouldn’t $30/hr make more sense? That would drive the economy twice as fast. Wait, if we made the minimum wage $45/hr, we are talking 3 times as much boost to the economy. Simple math then tells us that $100/hr would put the USA on an unimaginable path to wealth and prosperity for all.

Ok, so at this point even the most liberal (well, except for Kshama Sawant, who is chanting something about ‘free stuff for everyone’) are thinking ‘now don’t go overboard here, $100/hr is probably too much, although we like the way you are thinking…’.

Just for the record, I am in favor of a minimum wage of $0/hr. Of course, just thinking this is enough to get some people on the hard left out of their seats screaming about my being heartless, inhuman, uncaring and wanting to take food out of the mouths of babies. But, please hear me out before sending me to the depths of conservative hell.

TANSTAFL.

I wrote a blog about this economic concept a while back, you can go back and read it if you care. The basic tenant of TANSTAFL is ‘There Ain’t No Such Thing As A Free Lunch’. In other words, money doesn’t just magically appear like a stream of bitcoins, it has to come from somewhere else. It’s kind of the same thing as government spending. Every dollar the government spends has to be taken from someone first. In the current topic, every dollar paid to a burger-flipper has to have been taken from a customer first. The more you give to the hamburger-flipper, the more you have to take from your customer. There Ain’t No Free Lunch. At $9+, you, the customer, are paying $4-$5 for a hamburger that has about $0.40 worth of materials. The rest of the money goes to pay for the fancy signage and the people turning pre-burger materials into something you want to eat. The material cost remains reasonably steady, goes up as inflation dictates. So the cost of the people making the burger has a significant impact to the cost. No brainer, the money has to come from the customer. If I suddenly have to pay the burger-flipper $15/hr, that’s a 66% increase in the cost. The $5 burger now has to cost $8.33. Result? Well, maybe your burgers are so great and awesome that the customer just sucks it up and pays it. Or, the customer decides that $8.33 is WAY more than they are willing to pay, so they don’t buy one, or at least maybe not as often. Or, the evil burger-owner-overlord decides that the customer is not going to pay $8 for a burger so fires one of the burger-flippers as a way to reduce his/her costs and keeps the price of the burger the same.

Not a lot of great choices here.

So why do I go the other way to eliminating the minimum wage? Free-market forces.

Let’s say there isn’t a minimum wage at all. I am the evil burger-owner-overlord and I advertise for a burger-flipper at the hourly rate of $1. And nobody applies. Hmm. Ok, I will go $2/hr. Nobody applies. Free-market pricing dictates that I will have to continue to raise the amount I am willing to pay for a position that requires no talent or education until someone is willing to accept said amount for the job. The job here, therefor, priced itself. If I don’t like the level or ability of what I can get for, say, $5/hr, I will again have to be willing to pay a bit more to attract a better employee. I have to maintain a workplace that is attractive to the people I want to attract as employees, perhaps even offering some perks or benefits to keep people around. I am not free to pay $1/hr because I will end up having to flip the burgers myself. I can price my burgers aggressively and attract more customers, which means I will have to hire some more people. Everyone wins.

Well, you might say, not the poor shlub that has to work for the paltry $5/hr I am having to pay. True. Very true. And the poor shlub has several options. They can do whatever is necessary to make themselves more valuable to someone and be paid more money. They can leave the job and find another that pays them more. They can stay and work hard, convincing the evil burger-flipper-overlord that they are worth more and can contribute more to the venture and get a nice raise.

Why is this bad?

Minimum-wage positions are not designed for people having to raise a family, they are designed for kids in high-school or college trying to raise some spending money. If you really look at the statistics, that is who is being paid minimum wage today. Raising the minimum wage to $15, or $100, does not affect very many people and it harms everything else.

But it feels good. It feels really good and makes everyone think ‘We Care’, and it really sticks it to the evil burger-flipper-overlords that have taken advantage of our youth to line their own pockets etc…

So let’s make it $100!

Advertisements

From → Uncategorized

One Comment
  1. Excellent description of this situation from someone who is on the front lines (a small business owner). Keep up the quality venting!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: