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Friday
Jan112013

If 8 is good and 10 is better why not go up to 100 or 1000

Interesting discussion over on Blue Hampshire this week regarding a bill currently pending in the state house.

HB 127 "AN ACT relative to the state minimum hourly rate."

Our friends over at Blue Hampshire had the following to say about this bill idea:

First I would like to say that I am happy to see that Rep Sullivan is already pushing for a higher minimum wage.  However, does this law go far enough?  Is $8.00 per hour really what we want to set the NH minimum wage at?

Right now, New Hampshire is the bottom of the barrel in minimum wage laws.  Massachusetts is already at $8.00 p/h. Vermont is at $8.60.  This is good, but I think we should push for more.

There is already a national push to move minimum wage to $10.00 an hour over the next two years.  The proposal was put in last session and failed to gain traction.

To sum it up, the current federal minimum wage of $7.25 an hour is bad.  $8 an hour is better but $10 is better yet.

When I read this I think then if $10 is better yet why stop there?  Wouldn't $20 an hour be even better.  Or $50?  Or why not $100 or $1,000 an hour?

Why not just make minimum wage an even $1 Million an hour and solve all the problems in our country all at once?

Think about it.  Students with tens of thousands in student loan debts would be able to pay them off with just a single hours worth of work.  Families struggling to pay off their mortages would be able to pay off their debts after a single day of work.  And with everyone earning $1 million an hour we'd have more then enough in tax revenue to pay off the national debt in no time.

Great idea right?

Sure, it's a great idea until you consider reality.

Let's assume you run a business.  You sell widgets for $5 each.  The company that makes them charges you $3 each for them so for every unit sold you earn $2 profit.

In an average day you can sell around 350 units.  350 X $2 profit means you earn $700 in profits during a normal 8 hour day.  Being a typical business you can't do everything alone so you have a couple employees.  Let's say you have two cashiers to cash people out, a stock boy to make sure the shelves are filled and a maintenance guy who fixes things around the shop.

It costs roughly $20,000 a year in benefits for an average full time employee.  This is a combination health care costs, taxes, insurance etc.  To be generous let's lower this down to just an even $10,000 a year because suddenly ObamaCare makes employing people cheaper.  So we have $10,000 divided by 52 weeks then again by 40 hours comes to $4.80 an hour for the cost of benefits per employee.

Doing the current math...

2 cashiers each earning $7.25 + $4.80 in benefits costs your business $24.10 every hour.

The stock boy has worked for you for a while so he's up to $8 an hour + $4.80 in benefits so he costs the business $12.80 an hour

The maintenance guy, being skilled, earned $20 an hour + $4.80 so he's $24.80 an hour

This brings the total up to $61.70 every hour not including your own salary.  This comes out to $493.60 a day in expenses leaving $206.40 for your own salary to live off.  Which breaks down to $21 an hour plus your own benefits of $4.80.

Increasing minimum wage to $10 an hour as our Blue Hampshire friends propose as a great idea would add to your expenses.

Your 2 cashiers are now $10 an hour + $4.80 so they come out to be $29.60

The stock boy bumps up to $10 an hour + $4.80 coming to $14.80

Assuming you keep your maintenance guy the same he'll still come out to $24.80 an hour

Now every hour you have to come up with $69.20 which all else the same leaves you with $7.50 an hour less in your own salary.

Here are a couple more things to consider...

If you were that stock boy who has slowly gotten increases over the years would you be happy now if you were essentially back at minimum wage earning exactly the same as the two cashiers who just started their jobs?

If you were the business owner would you attempt to get by on less?  Most would increase the price of their product.  Chances are since the company making the widget likewise has to pay out more in salaries they too will increase their price and the trucking company bringing the widget from the company that makes it to your stock room will also charge more.  350 units per day average just about 44 units per hour.  To make our math easier let's round it up to an even 50.  50 units an hour would mean every 2 cents in price equals $1 an hour in store income.  To raise minimum wage from $7.25 to $10 an hour would be a 38% increase.  Saying not everyone earns minimum wage from the manufacturer to your business let's say it only results in a 20% increase.  That $3 now becomes $3.20 and just to make up the $7.50 loss you saw in your own salary you'd need to increase your own price an additional 15 cents on top of what you are being charged.  Now your widget is selling for $5.35

With an increase on the cost of living with the cost of products going up, now your maintenance guy's standard of living dropped as did yours own and this is just on a 5 employee shop.

Since you own the business you have the ability to increase the cost you sell your product for so your own standard of living wouldn't drop but there isn't a law requiring you to make it up to your maintenance guy since he's above minimum wage.

So what happens?  The business owner (let's call him Rich) can set his own salary so he keeps going up the ladder by passing off higher costs on those buying his product.  Those at the bottom see a small bump but they also see increased costs.  Those in the middle class get completely screwed because they see increased costs but don't see any increases in wages to make up for it.

In other words, the rich get richer and the poor and middle class get poorer, everything democrats claim they are against.

And if you want to really add a double dose of reality into the mix, let's say it's a bigger company who has 100 or even 1,000 employees.  In their case, rather then increase costs to consumers they can get around the added expenses by laying off 5 or 10 percent of their workforce.  This puts more people living off government, increases expenses and taxes on the rest of us.

No one wins.

 

Reader Comments (5)

Why not push for $100/hour? Think of all the extra taxes that would gin up to fill the coffers of Grate States! Why, just here in New Hamsters there would be a surge in booze sales at the State Liquor Stores, and think of all the extra disposable income to buy more cigs to prop up declining State tobacco "revenues". FORWARD!
– C. dog dispensing tidbits for only $1/hr
January 15, 2013 | Unregistered CommenterC. dog
So we'd rather let companies like Walmart, McDonald's Burger King, Regal Entertainment Group, and all the other chains continue to get New Hampshire people to work for as low a wage as they can and suck the profits out of the state and send them to their corporate headquarters, CEOs, and stockholders? Then the underpaid New Hampshire employees who might be working 40 hours a week for well under $20,000 a year have to ask for assistance to bring up their families, because those out-of-state companies are sucking all the profit out of New Hampshire? Raising the minimum wage to a livable wage for New Hampshire makes a lot of economic sense.
January 16, 2013 | Unregistered CommenterJim Splaine
Yo Jimbo Baggins –
Perhaps you could 'splaine to us po' folk how your wage-setting proscription fits into a live free kinda state, you know, a place where adults can decide things all by themselves without the club-fisted hand of Nanny to change their diapers and listen to their diatribes? Don't know 'bout you, but I rarely spend my coin at Walmart unless I want something dirt cheap and don't care if it breaks in a year – and I never go to fast food portals 'cause I'm watching my girlish hour-glass figure. But unlike you, I don't want to prevent others from doing so, nor do I want to dictate the terms and conditions of employment – I leave that up to those adults directly involved in the exchange.

Look MA-MA, no Nanny required! That just makes a lot of liberty sense.
– C. dog pelting pols in their own litter infested sandbox with glee and gusto
January 17, 2013 | Unregistered CommenterC. dog
We continue to let Ivy League Schools pass on their profit to the poor students.

And we let Hollywood pass on their profit to themselves.

Actors should work for a maximum wage on movies without violence.
January 17, 2013 | Registered CommenterEd Naile
Jim,
What's going to happen when prices at Walmart start going up as a result of those higher salaries or as they find they will have to cut a percent of their staff to make up the new costs?

Look at what is happening right now around you. Even here in NH corporations are cutting back staff because of added costs and higher taxes. You aren't hurting the CEOs with these hits, you are hurting the little guys on the bottom who are now finding themselves out of work. And as unemployment goes up, sales to these companies go down increasing the problems.
The situation I describe in the above article assumes that sales don't drop as the prices rise but in reality they do. If you have to pay more for something fewer people will buy it. Companies needing to pay their safe who are faced with decreased sales are left with 2 choices... either increase prices even more hoping to make up the difference or cut back on staff.
January 17, 2013 | Registered CommenterRick Barnes

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