Tuesday, June 2, 2015

Unintended consequences of $15/hr min wage

I still can't comprehend the number of people in the US who think that raising the minimum wage to $15/hour will be a good and positive thing for American society.

Of course it will improve the lives of those currently making minimum wage of $7.25/hour, assuming they don't get fired because the business owner can't afford to pay $15/hour.  Their lives will improve, of course.  Doubling anybody's wage without asking anything in return, such as greater skills, and perhaps more commitment to the company will benefit that individual enormously.

BUT: and there's always a but in these kinds of policy decisions.  The number of people making minimum wage in the U.S. currently are just a fraction of the total work force.  Additionally, this minimum wage is only offered to those with minimum skills, and with perhaps little or no workplace experience.  Minimum wages earned by people over the age of 21 are, to be frank and honest, are the going price for people who have so far failed in their lives to improve themselves.  Additionally, if these minimum wages are paid to Americans over the age of 60, this is the price that is paid to people who have failed to plan and save for their Golden Years, and if these low end jobs are the best they can find, there is no sympathy to these folks from me, sorry to say.  You oldsters on minimum wage had an entire working lifetime to improve your skills and to save your pennies for just this eventuality, 'as ye sow, so shall ye reap.'  Or so they say.

But what most Americans do not understand is that by jacking up the minimum wage without requiring a commensurate increase in productivity, the only thing nationwide that we will see is increased unemployment at the bottom end of the wage scale.  Lots of current $7.25/hour people will be simply sacked.  Nothing personal, it's just that the business that employed them cannot afford to pay a low skilled worker anything more than what they produce. 

Business owners will find ways to get the job done with fewer employees, such as fire unenthusiastic U.S. teenage citizens and slow poke Americans in favor of highly motivated undocumented

Businesses will invest in automation to accomplish the lower level tasks that were done by employees prior to the jack in the minimum wage.  Resulting, of course, in higher unemployment.

Wages are nothing more than the price of labor.  In pure economic terms, when the price of something goes up, the demand for that something goes down.  When the minimum wage goes up, demand for people earning the minimum wage goes down.  The lowest on the economic ladder always get hammered.  Except for the few lucky jamokes who somehow keep their jobs, and these workers are truly the exception.  Additionally, the employer will keep only the best of these remaining souls, and will actively seek replacements of these guys and gals, too, now that they are paying top dollar for their unskilled services.  Take that to the bank.

I am always astounded at the average Joe who doesn't get this.  It's as simple as 2 + 2 = 4.  No more complicated.


LL said...

The dim individuals for whom minimum wage is a lifestyle and not merely a rung on the ladder don't understand that 2+2=4. If they did, they wouldn't be earning minimum wage. There are somewhere around or over 50 million people in America who receive food stamps. The society is sick. It was made sick by socialists who have fostered a grievance culture and who have advanced the philosophy that it's not "equal opportunity" anymore but "equal outcome" for all whether or not they earned it.

Minimum wage was an effort to artificially mess with supply and demand. It's not like the income tax system that offers non-earners an "earned income credit" that can be $10K per year. Maggie Thatcher said that eventually you run out of other people's money. It's why the economy is so tepid. Raising the minimum wage only screws the poor. But communists get votes by doing it so they do.

innominatus said...

The consequences are so obvious and predictable that one has to wonder whether they are really "unintentional"

Woodsterman (Odie) said...

In liberal La La land 3 + 2 = 4.

Gorges Smythe said...

For the most part, I agree with you. Yet, I've read that in some foreign countries, McD's pays the equivalent of $15, yet only has to charges 50 cents more for it's sandwiches to recoup the difference. Many Japanese firms pay their plant managers no more than 50% more than their line workers. I think some of the problem is a demand for too much profit in some companies, and overpaid top-level people.

Kid said...

Fewer people will be employed who should be employed.
Prices will go up.
Welcome to the next inflation spiral.

Ed Bonderenka said...

It's as simple as 2 + 2 = 4. No more complicated.
Except with common core.

Ed Bonderenka said...

So, where's the comment I left yesterday?

Brighid said...

Those who push for this, could not have ever owned or managed a profitable business. Common sense, or much of any kind of sense has been lost in a lot of places...

Fredd said...


You are dead spot on: the proponents of these stupid minimum wage hikes have never met a payroll in their lives, and have run not so much as a lemonade stand. They don't understand capitalism at all, not even a little bit.

In a sane country, the minimum wage would be $0.00: which is what a lot of people are going to be earning once this crazy crap passes.

Fredd said...


I lived in Germany for 6 years. I loved to eat at McDonald's. When I was there in the early 1980's, a quarter pounder with cheese, medium fries (pommes frites) and a beer would set me back about $11!! That was in 1981! That would be about $30 today. Yes, Europeans pay lots to their workers, and since there's no free lunch, the costs are passed on to customers. Who pay it, or walk away. I paid it.

Do you think Americans are willing to pay $30 for a lunch at McDonald's, Gorges?

Fredd said...

Inno: depends on which way you are looking at this mess. Yes, people with brains and who have ever run so much as a hot dog stand understand that no good will come of this.

Those who sit in their ivory towers in the faculty lounges of Columbia and Yale truly think this is the way towards a living wage for everyone. dopes. all of 'em.

Fredd said...


Politicians have been messing with the means of production in the US forever, mostly Democrats. Land, labor and capital all have prices.

Alan Greenspan, Ben Bernanke and now Janet Yellin are all messing with the price of capital, the interest rate, and holding it artificially low.
Barney Frank and his buddies at Fannie May have been messing up the price of land, and giving it away to hobos, which also messes things up when those hobos move on and leave the property in flames.
And now the Democrats want to jack up the price of labor, and artificially set prices way above what the market will bear. Not good. Not good at all.

Fredd said...

Odie: La La does not stand for LL, you know. Even though he rides his death bike there almost every day.

Fredd said...

Kid: prices will go up at those companies who have to use these now exorbitantly over-paid non-skilled morons. No free lunch, kid. No, I didn't just make that up, but wish I did.

Kid said...

Fredd, It appears we are headed for one more lower low in Gold, then it will be a loooooonnnnnnnnnnnnnnnnng bull market in gold.

Fredd said...

Kid: who sez only one more lower low? Gold Bugs? Why not another couple of hundred lower lows? Maybe $700/oz? Why not?

Those same idiots you listened to three years ago never saw gold dipping below $1700 and ounce, did they? Like Glenn Beck and his ilk.

Don't bet the farm on it, Kid. You might be surprised at how low gold can go. You heard it here first, from the Oracle of Illinois.

Kid said...

Fredd, Heh. Glenn Beck is an idiot. I've never followed his advice.

The proof will be in the pudding. Let's say spot gold about 1000 for a new low.

You heard it from the Cincinnati Kid and unless you have Lady Fingers dealing for you, it might just go my way.

All in fun Mon Ami. But I will put some $ on it if the ETF GLD dips down between 105 and 110. Most definitely.

Fredd said...

Glenn Beck is not an idiot. He is extremely bright. But often (not always) with extremely bright folks, they tend to think that they and only they know how things should be, since everyone else is so dang stupid comparatively speaking. And that they, because of their towering intellects, have a monopoly on the truth.

Arrogance such as that displayed by Glenn Beck, both Ron and Rand Paul, and particularly John McCain and Barack Obama, is dangerous. Once they gain any power at tall, they wield it like a ham fist and base our country's future on their hunches, which are no more than that: educated hunches.

Clearly Glenn Beck and his huge bulging brain was wrong about gold so far. He could not have been more wrong. And will he ever apologize for misleading thousands of retirees who invested in gold when it was at $1900 and ounce and now have an exceptionally diminished portfolio? We only hear crickets chirping from that arrogant piece of work.

Kid said...

Glenn Beck was horribly wrong about gold. You don't buy when people are doing the wave, you buy when your knees are knocking. Traditionally stated as Buy when others are fearful, sell when others are doing the wave.
I tossed Glenn under the bus years ago when I had him on driving to lunch and I heard him say "We need to support our bipartisan president" talking about oBAMa.
No 2nd chances from that sort of brain vomit as far as I'm concerned. I don't care if he's an 'entertainer' or not.
We need people on the radio like William F Buckley. Conservative. No BS.

Fredd said...


Well, now you are coming around. Throwing Glenn Beck under the bus is a step in the right direction towards sanity.

Next step in your 12 step program in curing you of being a gold-bug-aholic is to admit that gold is a commodity, and not a currency.

Try becoming a pork-belly-aholic for awhile, see how it feels.

Kid said...

Fredd, all I'm saying is people have always valued it and it has kept abreast of inflation since 1913 when the evil Federal Reserve was created to more efficiently steal our money via inflation.

Kid said...

For Your Reading Pleasure Fredd. Coming Bull Market in Gold