Minimum Wage Debate Continues

I find it interesting reading the arguments in favor of increasing minimum wage.  Often times you'll find that they use tortured logic, lack of facts or the arguments are driven on pure emotion.

Case in point, here is an article from the Patch website listing six reasons for increasing minimum wage to $10.10 an hour.

Soon after high school in 1979, I was making $8 an hour with health insurance at a silkscreen company. My apartment was $250 a month with utilities included. I owned a great set of wheels that had cost me $1000, and it burned gas at the cost of $1.25 per gallon.

Today at Walmart or McDonalds, employees are making a living wage tailored for the 1970’s. Working full time, but still unable to afford health care and food, workers are encouraged to go to the government for help. We are all paying for what the corporation “fat cats” will not pay.

Already in the opening two paragraphs the author puts out misleading statements and pushes pure emotion.  In 1979 the minimum wage was $2.90 an hour, so clearly this writer had some level of drive that they did not accept a minimum wage job and instead fount one that allowed them a better pay, health insurance, an apartment and "a great set of wheels".  But then they compare their standard of living to that of someone living on minimum wage.  Apples and oranges.

The “then-go-work-somewhere-else” philosophy does not work, since all corporations are aware that there are people with the “will work for food” signs. Without bargaining power, workers need to be protected by regulating capitalism.

Another emotion driven argument with nothing backing it up.  Yes unemployment rates are high but do you honestly think that increasing the costs on employers will get them to hire more people?  Of course not, it will drive more people out of work and allow companies hiring unskilled laborers to offer even fewer benefits.

Watch the number or carts that constantly role through your local Walmart checkouts, ringing up over 100 million in sales per year, per store. It might be true that increasing the minimum wage will result in increased prices, mainly because fat cats will want to keep their billions growing. An increase to $15 an hour could result in an increase of 15% per item. I believe that the positives do however outweigh this one small negative.

Again pure emotional drive argument with a lot of feeling but short on facts.

I attempted to find the average revenue for a Walmart store but because they range in size from regular stores to super centers and each market is vastly different there was no solid revenue dollar.  It is estimated at the $100 million our author suggests, however that doesn't take into account the costs of running that store.  The $100 million is only the gross income.

I did find their % profit margin, which is 3.23%.  That would mean of the $100 million each store has a profit for their "Fat cats" of around $3.23 million. 

Each Walmart store employes around 470 people.  If all 470 employees made minimum wage and saw an extra $3 an hour that would be an impact of $1,410 an hour and at an average of 40 hours a week that would be $56,400 a week and $2.9 million a year.  And that would leave them with a profit of only 1.23%. 

Could Walmart do it and still be profitable?  Yes.  However what about the dozens of other retailers and small businesses that aren't Walmart?  The left loves to point to Walmart but they are just 1 retail store, regardless of how big they are.  How many of you (whether you know it or not) have Walmart stock in your 104k's or retirement plans?  Do you think that a sudden drop of more then double wouldn't impact them?

And if Walmart were to increase salaries to $15 as the author suggests?  Well now you're looking at nearly $8 more dollars an hour which totals up to $7.8 million per year and now any profit is gone so yes good would need to go up in price.

As for other retailers, Target's average profit margin is 1.98%, Costco is 1.7%.  They wouldn't be able to absorb the salary increase and remain profitable even at $10.10 an hour.  And then there are the really small ma and pa stores to boot.

This results in two things, higher costs of living and more people unemployed.  Small ma and pa stores unable to handle the increased costs would close up shop all together.

While the economy has improved with rising corporate profits, the minimum wage has not kept pace with inflation. That apartment that I had for $250 a month is now rented by someone paying $1000 a month. Raising the minimum wage is one way to fight against the destructive powers of the 1%.

I could write an entire series of articles about why costs of living have gone up so much.  Look back at some of my older articles and you'll find just such examples.

Today, a teacher can only afford the lifestyle that a burger-flipper had in the 40’s.

The average teacher today earn around $45k a year, that is far above minimum wage.  This pure emotional driven argument does nothing to help the authors point and if you stop and think about it, it actually hurts their point.  By increasing the cost of good by increasing minimum wage, it doesn't force the teachers salary to go up so their standard of living would go down even further.

This brings us to the icing on the cake.  The 6 reasons the author feels minimum wage should increase.

1.      To decrease reliance on food stamps, Social Security Income, and other government assistance programs.

This is 100% wrong.

When minimum wage is increased, unemployment increases as a result.

Also regarding less people on food stamps, also wrong.  To qualify for food stamps you must have a weekly income of $1,174 for a single household (higher for more people in the household).  That comes out to be a little more then $29 an hour.  Increasing minimum wage from $7.50 to $10.10 or even $15 an hour will not increase salaries enough to reach the minimum requirement.

2.       For a positive stimulus to the economy by higher consumer spending, with little or no impact on unemployment.

If unemployment goes up and cost of goods goes up, who exactly will be spending more?

3.       People that are paid more are people that pay more taxes.

If you are earning less then $32,396 a year you are not paying taxes.  Increasing from $7.50 to $10.10 would put your yearly salary from $15,600 a year to $21.008 a year, both of which would keep the earner below the rates when income taxes would kick in and both would qualify them for earned income tax credit, meaning they get money back they never paid in.

4.       An increase to $10.10 is modest, but would pull an estimated 4.6 million out of the poverty level.

In 2007 and 2008 the minimum wage went up from $5.15 to $5.85 and then $6.55.

In 2006 the number of Americans in poverty was 36.5 million.  IN 2007 after the first wage hike the number went up to 37.3 million.  In 2008 it went up to 39.8 million.

There is no evidence supporting that minimum wage increases would decrease the number of people in poverty but there is evidence supporting the opposite.

5.       An incentive for increased productivity and reduced labor turn-over costs.

Again, lack of facts.  Increasing minimum wage rewards the lazy while punishing the productive and thus hurts productivity.

If you worked your butt off to get your salary increased from $7.50 to $10 while another worker was lazy and slacked off remaining at $7.50 then suddenly minimum wage increases and you are both at $10.10 an hour do you see any reward for your hard work over the other person's lazy behavior?  What drive would you have to continue to work hard if their salary goes up just as high as yours?

6.       Although most of the 27.8 million working for minimum wage are not teenagers, an increase might get your teenager to move out of the basement and/or could help to pay for a college degree.

With unemployment rates going up do you really think your unmotivated and uneducated teen who is working random minimum wage jobs would suddenly find work?

When minimum wage is increased it actually hurts teen employment the most.

It is specifically for this reason that many countries that have established minimum wages also have a lower minimum wage for teens then they do for adults.