Saturday, February 1, 2014

Obama's new minimum wage: $10.10/hour - the dumb 'helping' the dumber

During Obama's state of the union address last week, one of the most discredited, damaging and outright stupid political snake oil initiatives has been trotted out yet again to 'help' the downtrodden: Obama proclaims that jacking up the existing federal minimum wage from the current $7.25/hour - already $7.25 per hour too high - to a dizzying $10.10 per hour will help the poor.

Bunk.  It will make more people poor, on the whole.  Some people will benefit in the short term from this mandate, but in the aggregate we will all be worse off in the long run.

When I say that the existing federal mandated minimum wage of $7.25/hour is exactly $7.25 per hour too high, that is because it is inarguable that the true, exact and immutable minimum wage is exactly $0.00 per hour, and this figure is exact to the 1/100th of a penny.  Zero, nada, zilch per hour is what somebody makes when an employer just doesn't have the means to justify hiring an employee in the U.S. today.

But Obama and his Utopian dreamers in the faculty lounge dismiss the reality of the situation, and they will mandate paradise on earth, and in this case, legislate a minimum hourly wage standard of $7.25 per hour, or if Obama gets his way, $10.10 per hour.  What this mandate (either one, the old minimum or the new, doesn't matter) in effect results in is increased unemployment, or more people earning the true minimum wage: nothing per hour.

A wage or salary is nothing more and nothing less than the cost of labor.  The price of labor.  Everything worth while in this world has a price, and the prices of the means of production are all relatively well known: the means of production, as economists call them, are in effect land, labor and capital.  Each has a price. A well established price at any point in time.

Economically, if a price for something is too high, people will balk at paying that price.  They will find alternatives that meet their satisfaction, rather than pay too high a price for something.  Say, for example, some beach front property in southern Florida next door to Donald Trump's Mira Lago compound goes up for sale for $1,000,000 for an adjacent acre to the Donald's digs.  Whoa, you say, I'm not going to shell out a cool million just to say I live next door to the Donald.  Forget that, there's another piece of property down the road, that is only going for $825,000 an acre.  I will be fine with that.

And so that kind of behavior goes for virtually any transaction in America.  Economically speaking the higher the price of anything, all else held constant, the lower the demand for it.  When Obama or any Democrat squeals for higher minimum wages, they are squealing in effect for higher unemployment.

An employer will simply not just sit still and eat this increase in the cost of their payroll.  They can do many things to cope with this new mandate, and among the alternatives are: eat it, let the increase come out of their profit margin.  Not likely, as employers are in business to make a profit, not just to employ people.  They can perhaps pass on the cost to the consumer of their product: also, not likely.  That's not the way things work in our economy, because if they jack up the cost of their product over that of their competitors, they will lose market share.  And when they lose market share, they lose profit margin.  See above, employers don't like that to happen.

What is most likely to happen, is that they will just do with one less employee: if they had three employee's at $7.25 per hour before Obama's new $10.10/hour mandate, the odds that they will simply fire one of the three employees is high.  How is that better for these minimum wage employees?

It's fine with the two remaining employees.  It's a disaster for that third employee who just lost his job, thanks to Barry, and subsequently earns the true minimum wage: bumpkus per hour.

It is just that simple.

16 comments:

Kid said...

Thoughts. First off I agree with you analysis.

Some people don't know that many union positions have their salary based upon minimum wage. Therefore, it minimum wage goes up 25%, so do these union job wages. Airport baggage handlers for sure are one, and there are may others.

You're right, if McDonalds had to pay 10 bucks vs 7.25, then it might become cost effective to replace counter persons with customer operated ordering machines.
After all the countre person takes the order for 2 Eggamuffins and an OJ and translates that into pushing a couple buttons. The customer already is swiping their own CC, so it's actually surprising McD's hasn't already replaced the button pusher. That's a bunch of people out of a job. People who Need a job.
Leftie's are such dumbasses.

Push the red button the yellow one pops up. Push the yellow one, the blue one pops up.Things are not simple. If they were there wouldn't be any fricken problems in the first place.

Trestin Meacham said...

Raising the minimum is like giving a cough drop to someone with Bronchitis. In the long run it will do no good.

The real issue (which they ignore) is inflation. If our currency was not intentionally being devalued there would never be a need for a
cost of living increases.

Fredd said...

Kid: unions are another matter, and everything they do is aimed at hobbling our economy to their benefit.

Aig-a-muffin button pushing will eventually go the way of gas jockeys (except in NJ and OR): every idiot knows how to operate a gas pump (except in NJ and OR), and now automation has eliminated those guys that used to wash your windshield, check your oil and fluids, etc. Their wages used to be rolled into the price of gas, but after it got to around a buck a gallon or so, people started squealing like stuck pigs that prices were too high, and gas stations took the logical step of eliminating a major expense: people.

Remember those guys? The ones who would lose your gas cap about every third fill up?

Those ancient elevator operators and gas pump jockey's fate is in store for those aig-a-muffin button pushers, for sure now that Obama will give it his all to guarantee putting these dopes out onto the mean streets.

Fredd said...

Trestin:

Inflation is a part of the human condition that will never go away in any economic system.

There's always somebody going to fuel inflation by giving someone a raise for no improvement in efficiency. And there will never be a government on God's green earth that won't try to fiddle with the currency for various reasons, all of them bad.

Kid said...

Fredd, I was one of those guys. Pumping gas at .35/gal back in the 60's-70's. Checkin oil. Washin a windshield, kickin a tire.

Fredd said...

Kid:

My brother was one of those guys, too.

But we lived in Oregon, and his job was protected from automation by Oregon legislators who deemed the public too stupid to pump their own gas.

The price of gas is high in Oregon for this very reason. And those Oregon gas jockeys no longer check oil, tire pressure or wash windshields, nah, none of that.

Don't get me started, Kid.

Kid said...

Fredd, Imagine we weren't already using gasoline. Can you imagine what it would take to introduce it as a product in today's environment???

By the way, Let me know if you're interested in playing with the marijuana penny stocks. Super high risk but high reward also. I currently own PHOT, HEMP, FSPM, MCIG, avoid erbb, grnh and some others like the plague.

Kid said...

Fredd, PS, I may sell all those MJ stocks tomorrow. For now, they are day trading vehicles.

Fredd said...

Kid:

I'm no day trader, but I am OK with making a little dough betting on the way things are going with the culture.

Pot: used to do it, a LOT. No more, it makes me dumber than I already am, and that's saying something. That, and I am a law and order kind of guy in my old age, and blazing up is not my style, not anymore.

But your track record with me is 1 and 0, with DUST kicking some serious Glenn Beck butt for me.

Please pick ONE weed stock, I will put $1000 and let it ride, for better or for worse. I don't want to research it, check it out, or any of that. It's enough for me that YOU did that already.

My long term gut is that these referendums allowing pot in some states for recreational use but still crimes with the feds, I am thinking that these laws will in time wither on the vine in their test states (WA and CO, maybe Oregon will jump on the band wagon).

Grown ups will replace the devil-may-care liberals in Congress at some point in my lifetime, and the child's play will come to an end, along with the unsustainable deficit spending we are doing that will seal our doom.

We'll see, though, please pick the strongest doobie stock for me, and I'll go with it at least in the medium term.

Again, you are on a winning streak with me, Kid. Keep it up.

Kid said...

Fredd, I'm in it with ya. 2500 shares, double at least or bust.

Kid said...

Fredd, Looks like the gold miners are breaking out of their funk. NUGT.
I'm out at the moment (sold at the close today), hope to get back in on a pullback. GDX possibly to 30 according to a smart guy, not in a straight line of course.

Kid said...

Fredd, GDX is very extended right now. I'd look for consolidation or a pullback if you're interested in Nugt. I do think GDX goes to 30 after some kind of rest, then we'll see

Joe said...

"Grown ups will replace the devil-may-care liberals in Congress at some point in my lifetime..."

Exactly how long are you planning to live?

Fredd said...

Joe:

Remember, Joe: Herbert Stein uttered no truer words than these - 'if something can't go on, it won't.'

At 58 years old and some serious change, I hope to see a few more decades. The crazy spendthrift congressional ways will have to come to an end soon, since they cant go on, like Herb said.

Ten years? Not much more than that before the piper needs to be paid.

Fredd said...

Kid: I'm done speculating on gold. My short play was based purely on history that I was around to witness: back in my 20's, I had no bucks, but watched gold go from $32 an ounce to $800, then plummet back to $300, all in around 10 years.

In my 50's, I saw this happen again, and had a few nickels to rub together when I saw gold reach $1900 an ounce, with no real basis for these prices. I bet that the price would go down, and I won that bet, and dumped my short position when gold crashed last year.

Now, I have no feel for where gold will be, and nobody else does, either. Regardless of how huge their brains are, Kid.

Gold is a commodity, and unless you are Hillary Clinton, betting on commodity prices is a fool's errand.

Kid said...

Fredd, I can't argue with that! Good Luck sir.

Just day trading. Personally, I never make long term bets.