Government doesn’t consider $15 minimum wage consequences

By Robert J. Garrison

We must look at a couple of main objectives of being in business before we address the merits of the $15 minimum wage.

The first objective is to market a product or service that is either new or is superior to a product or service that is already being offered.

The second main objective of a business is to be successful. The way businesses gauge success is done by a couple of ways. First of course is profits. For a business to be successful they must make a profit. The bigger the profit, more the business is seen as successful. If the cost of wages go up, businesses will compensate that hike in wages by cutting hours of their employees to protect their bottom line. If a business can’t make a profit they won’t be able to hire more workers.

We all have been in a grocery store and seen those self check out lanes. Grocery stores put those in to cut back on workers because the cost the labor was not cost efficient for the store. In fact, in Seattle that also passed a $15 minimum wage, McDonald’s was forced to offset the cost of a higher wage by replacing their cashiers with automated screens where customers can type in their orders. The bigger the profits the more able it is to grow which brings me to my next point.

The second way that businesses gauge success is by growth. Growth can come from expansion by either building a bigger factory/shop or by opening more factories/shops, which leads to hiring more employees. If you force higher wages onto small businesses, they will not be able to contribute to job creation. Small businesses are a huge contributor to job creation in the US economy.

The main driving force of the U.S. economy is small businesses. Statistics from the Small Business Administration show that:

  • The 28 million small businesses in America account for 54% of all U.S. sales.
  • Small businesses provide 55% of all jobs and 66% of all net new jobs since the 1970s.
  • The 600,000 plus franchised small businesses in the U.S. account for 40% of all retail sales and provide jobs for some 8 million people.
  • The small business sector in America occupies 30-50% of all commercial space, an estimated 20-34 billion square feet.

Also according to the Bureau of Labor Statistics,

between the third quarter of 1992 and the third quarter of 2013, small firms (those with 99 or fewer employees) accounted for 41.8 percent of the net employment change.

So we must be cautious when creating policies that impact small businesses, since it would impact a major job creator and service provider in the United States. This is why the $15 minimum wage must not only be debated but more importantly, it must be researched to see what its impact would have on economic systems. Not only should the impact on economic systems be looked at but more importantly studies should be done to see what the impact would be on those that live within those systems.

While a $15 minimum wage sounds like a good idea we must look at the impact of that policy before enacting it. Yet as we know, companies always find a way to offset the cost of regulations imposed on them by the government. They do that either by raising the cost of their products or they cut back on their work force. There have been many good intentions and ideas by really smart people who practically just didn’t work or made things even worse than they already were.

How would this policy affect those living in the economic system? Since I work with the homeless and poor as a Chaplin at a homeless shelter in Washington D.C., I will focus on that demographic.

First there is a misunderstanding about people who are homeless. These people are not homeless because they are lazy or don’t want to work. Many of the homeless that I come into contact with strongly desire to get a job so they can move into their own place. However there are a few obstacles the homeless and poor deal with that proponents of the $15 minimum wage don’t seem to be thinking about.

The main obstacle is the lack of affordable housing. The gentrification that is going on in Washington D.C. and other major urban areas is causing the prices of living spaces to rise. There are government programs in place that will help those that need the financial assistance to get into their own place, through housing vouchers. These vouchers are based on their income which means the more they make the less they get to help with housing. So yeah, they make more money if the minimum wage is higher but that might be offset by the government cutting financial assistance.

Another issue is that these people not only receive financial assistance from the government for housing but they also receive food stamps and medical assistance. These things are also based on the income of the person. So if they make more they might lose some or all of that assistance. This would also cut into the supposed extra money that they would gain by a higher minimum wage.

Usually every quarter one has to provide records of their income so their benefits could be adjusted more or less. I remember one instance when my mom and dad where on food stamps. There was one-quarter where my dad made an extra $30 because he had to stay at work due to his relief coming in late. Due to earning that extra $30 for that quarter, which equates to $10 per month, our benefits were cut by more than $125!

These are the issues that people who live below the poverty line have to deal with. If they have to choose to work at a job that pays a high minimum wage, it could cost them their housing voucher, medical, or food assistance they receive. If that happens, the extra income they would make at a job that is paying a high minimum wage would all but be erased and some might even find themselves going into the hole. If I had to choose between losing those things or working at a job that pays me a high minimum wage, guess what I’m not going to go look for a job, nor will I try very hard to find one. So these programs are there to give a hand up to those in need who find themselves trapped in these programs. This lack of foresight about the consequences of a higher minimum wage is my biggest concern about the $15 minimum wage.

Sometimes government has good intentions which we see here with the $15 minimum wage. However, government almost never seems to think about the consequences of those good intentions. If a city wants to raise the minimum wage, it must think about all of the consequences of that policy. Having a higher wage does not always equate to one having more discretionary income to spend as I have shown above. If a city wants to enact a high minimum wage it must also change other government policies that the homeless and poor rely on to get by from day-to-day. Raising the minimum wage is not the end of an economic debate but a beginning of the process which I believe must be worked out before a higher minimum wage is even passed.

 

Robert J. Garrison is a political and religious writer for The Systems Scientist

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8 thoughts on “Government doesn’t consider $15 minimum wage consequences”

  1. It’s so tiring to always hear the same argument :-(. This argument is now at least 2 centuries old, and that’s not hyperbole. Pay people a living wage and the world as we know it will end!

    If wages had kept up with inflation minimum wage would be $22.x something today.

    If people make $15 dollars an hour, they’ll be able to work one job, instead of two or three to make ends meet.

    When people make more money they will also spend that money. They are the jobs creators: their income is your revenue.

    Conversely, you can replace as many workers as you can by automated systems and invent new ways to do that. Yay you! You’ve reduced the costs of your business, and so has everyone else. You should be so happy, right?

    The question is not: how many workers can I replace with new technology? That’s only trivially important to a business. The real question is: how many customers can I replace? Because that automatic till is no doubt going to be buying 10 McDonald’s meals a day, is it not?

    I’m in a giving mood today, I’ll put it in simple words, and, I’ll type slowly so you can understand:

    The economy is for people, the people are not there for the economy. The people need money in a mass-production society, so that they can mass-purchase products. If the people are not allowed to partake in the economy, they’ll sidestep the economy and make their own systems. Replacing workers with automatons is not going to help you get more customers, in fact it’s going to end up costing customers because now people aren’t even allowed to make minimum wage anymore.

    Here’s another argument for your enjoyment: at no point have you heard that the spectacular rewards CEOs are awarding themselves with, even if the business is hurting, are detrimental to the growth of the company. It’s only when the hoi polloi stand to make a teensy bit more money that the economy goes to DEFCON 1. Bankers ruining the world economy to the tune of multiple trillion dollars at a time, wiping out decades of gains in a few short months, not a problem. Give them $90 billion dollars worth of bonuses, paid for with bailout money (paid for by the clods). That is NEVER a problem, it’s always ok. But: give the dirty faces a tip and a half, now we’re in real trouble. Now we’re heading straight for the iceberg.

    Paying $15 Dollars/hour is going to hamstring small businesses and ruin the economy! Jesus. H. Fucking Christ. Please read: The Van Paemel Family. (Cyriel Buysse – 1903).

    The more things change, the more they stay the same.

    Like

    1. My whole thing is that this $15 min wage is a knee jerk response …and anytime govt does a knee jerk response they don’t address or think about the other things that the law affects or the people.

      Those that are protesting for $15 min wage for workers don’t understand that if they are paid that they will most likely lose the govt benefits they have now which if they did they would wound up breaking even or finding themselves in the hole.

      Liked by 2 people

    2. Tibusheth,

      Thank you for taking the time to read our blog.

      We here at The System Scientist appreciate our readers feedback on our content. The importance of having a dialog is key to having a informative ideas spread. We do our best here at the System Scientist to provide sources and links to back up the ideas expressed in our articles and we would love for our readers to do the same when commenting.

      We here at The System Scientist love Tobias Smollett quote ” facts are stubborn things” . If you could provide sources for your argument that would be great.

      Liked by 1 person

  2. The premise of your argument lies in the free operation of the market economy as expounded by Adam Smith in his publication, An Inquiry into the Nature and Causes of the Wealth of Nations in 1776. Unfortunately, for 240 years we have lived in this mindset, believing that the theory is based on natural law or divine providence – and it is not. It functioned in the Industrial Revolution, today it is hurting us. Among the basics of the market economy are production, and more production (as you clearly point out) which leads to endless expansion (hence, globalization), consumerism and more consumption, higher and higher profits (again as you clearly state). The cycle leads to exploitation of natural resources – including human beings – and waste. But the larger problem, and a moral dilemma, is that everything in the market is a commodity to be bought and sold according to market forces. Thus, even human labor is a commodity! That is why there is crying out. Think of Pharaoh’s economy: more and more production, expansion of storehouses, fear of scarcity, and the people cried out. We should be thinking of alternative models. I don’t know about Washington D.C but many communities across the world are engaged in grassroots movements seeking different models that value human beings rather than see them as commodities in the market. A good example is the Economics of Compassion Initiative of Greater Cincinnati.

    Liked by 2 people

    1. Thanks for taking the time to read our blog, we really appreciate taking the time to comment on one of the articles. I think maybe a compromise on the $15 minimum wage would be best. Exempt small business from the law since it would more adversely affect them then big corporations. I agree with your critique that everything is being looked at or treated as a commodity. I think I tried my best to include a human element to my post to try my best to prevent this outlook of the debate.

      Yet, we do know that raising wages will always be passed down to the consumer by raising the cost of the product or service. If all companies do that just how far would that extra income go for the consumer? In your comments, you mentioned globalization. Trade deals have totally undermined the job market here in American. They have caused higher deficits, which kill GDP growth and have caused wages to stagnate. and Also Corporations have moved many businesses overseas to get out of paying higher wages and dealing with cumbersome regulation.

      Finally, like I stated in the article raising the minimum wage to $15 is a knee jerk response by the government which means they have not thought through the implications of that law on the poor and disenfranchised. If you are making $15 a hour you are more likely not be qualify for government assistance (food stamps, subsidized housing, child care assistance, ect. ect.)

      Once again thank you for your comments Mr. Mlay your insights are welcome and appreciated.

      Liked by 1 person

  3. A good approach would be to look at countries which have implemented minimum wage policies. In the U.K. employment rose by around a million following introduction of the minimum wage. I’m fairly sure some inefficient businesses went under, but at a macroeconomic level it was a success.

    At a simple level, by transferring income into poorer communities, that in turn creates secondary jobs – repair shops and hairdressers and takeaways.

    Obviously we are a long way from success – we have maximised employment but not income and the government still has to top up low income with tax credits and housing benefit – which begs the question, if a business cannot generate sufficient revenue to cover the cost of living of its employees, is it viable?

    I think the macro level would be the best way to tackle it too – start low and keep raising the level until employment or job creation starts falling. At that point you know the level is too high, not before. Individual businesses be damned, individuals frequently are – the point of macroeconomic policy is the economy as a whole, and low income is becoming a bigger issue than employment now.

    (Or we need to address the other end, and look at measures to lower the cost of living)

    Like

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