I have stayed quiet and out of anything “Hot Button Issue” for a while. In fact I’ve been trying to come up with some smartass post that you get a nice chuckle over, however I just read an article from my home state’s public health commissioner about wages and their correlation to public health. Basically it was a huge ad in favor of raising minimum wages. BAD IDEA! I’ll tell you why.
Any typical business or retailer will tell you exactly where profits go. I’m going to use an example of your typical mom and pop hardware store, let’s call it George and Gracie’s Hardware. The process in a sale of a product is actually quite interesting, first George would have to place orders with different manufacturers for tools. Let’s say he orders a box of 20 hammers. He pays $50 for them, meaning he paid $2.50 per hammer. The SRP (Suggested retail price) for each hammer is $3.00. He needs to recoup his money for the hammers and be able to buy more hammers, so he set’s the price for each hammer at $7.00. I know. This sounds like a math problem but just stay with me here.
You’re probably asking “Why $7.00?” Because he’s not only going to buy more hammers. He also has to pay his employees, federal taxes, state taxes, in some cases county and city taxes, employee taxes, electric bill, water bill, health insurance for his employees, advertising, a web page for on-line sales, loan payback and land lease if not rent. Out of all of that, he can only do so much about each of them to keep costs low. Now, George and Gracie are doing their best to stay in business, barely scraping by.
Then here comes the State and Federal government raising taxes. So prices go up, because they can’t afford to lose any employees. Business starts to slow down because customers can get their tools, in some cases, cheaper at another store. So now he has cut health insurance just to stay afloat. Now there’s talk about raising the minimum wage. The manufacturer of those hammers will also need to raise their prices to pay their employees. He’s got nothing left to do but let people go or raise prices again. The bigger chain stores because there’s more employees and in multiple states will have an even tougher time with variable local taxes and employment laws. So prices will rise in those stores as well. It’s like bailing one end of a sinking boat into the other end. When will it stop? When will the government realize that they are not in the business of business?
Do not get me wrong. I’m not advocating the elimination of minimum wage. People, for what ever reason, are not understanding that MINIMUM wage is not meant to live off of. It’s in place to make sure that you get paid something for your work. typically these positions are filled by teenagers because it’s part-time, they earn their own money, and take that first step towards independence. The retired senior citizens also take these jobs because they would like to do something other than sit around just collecting a pension or retirement and social security.
However, the workforce has gotten smaller since the last administration and has gotten progressively worse in the current administration. Leaving engineers and mechanics, programmers, you name it, to find jobs to try to make ends meet. Pushing the teens out of these jobs. The only way to reverse any of this is to lower the cost of doing business by getting out of business’ way to grow. Business growth means more jobs, more jobs mean more tax revenue.