by Don Fredrick, The Complete Obama Timeline, ©2021
(Mar. 21, 2021) — In a recent email interchange with a leftist, I gave an example I have used in the past: A small company has three janitors in its warehouse. Each is paid $10.00 per hour. If the minimum wage is increased to $15.00 per hour, the company might fire the least productive or least senior of the three janitors and keep the other two. The two who remain will be paid $15.00 per hour. They will also be expected to work harder—both to compensate for the loss of the third employee and to justify their higher rate of pay. The laid-off janitor goes on welfare.
Democrats think this will be a good thing. They apparently believe being unemployed at $15.00 per hour is better than being employed at $10.00 per hour.
I received this response from the leftist:
“If you need 5 janitors, you hire 5 janitors. If you need 5, but only hire 3, they are slave driven [sic; slave-driven] and worked to the absolute bone, and [you] would still need to pay them overtime and each one of those three would have to make up for at least another half a person’s amount of work to cover those last two unhired [sic; laid-off] guys. It just makes no sense. If you have enough work for 5, only hire 3, then the work stacks up, or you are paying the other 3 time and a half [sic; time-and-one-half]… assuming you are not a slave driving [sic; slave-driving] scumbag who brings in undocumented workers and sticks them on salary [sic; pays them cash by the hour] under the table, breaking our laws, and massively screwing the workers over and exploiting them… like the Con [sic; conservative?] Repub [sic; Republican] types are known to do.”
Why my “friend” changed the number of janitors in the example is unclear. Why he introduced illegal aliens into the equation is also unclear. He continued his run-on-sentence rant:
“I have read about how some of the GOP lovers massively overwork undocumented people, screwing over good people who are desperate to feed their families, they find ways to get them to put in the extra hours, overwork them in their final weeks, promise to pay them, this time late, 3 weeks, maybe a month not paying them, telling them it’s all coming, but then calling ICE to have them deported before paying them. Modern HUMAN SLAVERY has taken place right here in the USA using that tactic, and I read about countless Republican run [sic; Republican-run] contractors doing that for [Hurricane] Katrina clean up [sic; clean-up] contracts that were controlled by Bush cronies.”
I made no reference to illegal aliens in my message to him. There certainly are businesses in the United States that take advantage of illegal aliens—and they are operated by Democrats and Republicans alike. It is against the law to hire illegal aliens. It is also against the law for those aliens to accept employment. Some are no doubt paid less than the minimum wage, in cash that goes unreported to the Internal Revenue Service. It is unlikely, however, that those businesses make a habit of calling Immigration and Customs Enforcement officers to have those employees rounded up and deported, as it would leave them without those workers and at risk of being prosecuted by the federal government for having hired them in the first place. (Democrats apparently think law-breaking employers routinely snitch on themselves.)
One solution to the problem of abuse of illegal aliens is, of course, to not allow them to enter the United States illegally in the first place. Some shady businesses can certainly take advantage of illegal aliens, just as drug dealers take advantage of addicts, con artists take advantage of gullible people, and lobbyists use bribes to take advantage of politicians and their reckless use of power. Law-breaking certainly encourages some people to lose sympathy. A substantial number of Americans likely have no problem looking the other way if someone takes advantage of a law-breaking illegal alien. (If someone robs a bank, few would care if the thief gets mugged on the way out of the building.)
The leftist went on: “If you have work for 5 people, and a min [sic; minimum] wage hike causes you to no longer make a profit, you are not good at business to begin with and can’t figure out how to adjust and make changes. What does not change is you do not hire people you do not need, and you do not get rid of people you do need, just because they get paid a little bit more.”
A reasonably-run business hires the number of employees it needs and no more. It also fires them only when necessary because the cost of training replacement workers might be considerable, and also because—contrary to what many leftists believe—not every employer is heartless and enjoys seeing people suffer. It is also true that businesses generally do not pay employees far more than what they are worth. They are paid according to the value they bring to the company. An employee who contributes $30,000 in value to the company’s bottom line is not going to command a $75,000 salary. Further, an employee who is paid $10.00 per hour costs the company more than that because there are associated labor expenses that include training, unemployment compensation taxes, Social Security taxes, possible health and insurance and retirement benefits, and perhaps uniforms and safety equipment.
A $10.00-per-hour employee may very well cost a business $20.00 per hour after all factors are considered. If the employee costs the company $40,000 per year in salary, taxes, and benefits, that employee is naturally expected to produce at least $40,000 per year in value. Janitors do not get paid as much as an engineer who designs a new, profitable product. That does not mean the janitor is not an honorable and worthy human being. It merely means the company receives greater value from the engineer than the janitor. Mary Barra, the CEO of General Motors, is paid far more than a Chevrolet assembly-line worker. Their paychecks are not equal, but they are certainly fair because Barra (assuming she is good at her job) produces much more value for the corporation than does a factory worker—and the factory worker can more easily be replaced than Barra.
Most reasonable people should object to the statement that if a minimum wage increase “causes you to no longer make a profit, you are not good at business to begin with…” (The remark might remind some of a cavalier statement made by Hillary Rodham Clinton that companies not providing health insurance to their employees deserved to go out of business.) Business owners should be greatly offended by the arrogant “not good at business” remark. Contrary to what many Americans have been led to believe by Marxist professors and media leftists, profit margins for most businesses are far lower than the typical American realizes. Competition causes most businesses to price their goods and services quite reasonably. (The lowest profit margins tend to be in businesses that provide essential products, such as gasoline and groceries. The highest profit margins tend to be in businesses that provide non-essential products, such as perfume and designer clothing.) The reality is that an increase in the minimum wage to $15.00 per hour would indeed cause tens of thousands of businesses to no longer make a profit.
My leftist “friend” contradicts his own argument by suggesting that businesses are operated by greedy, cold-hearted Scrooges who can readily afford to pay their workers more but refuse to do so, while at the same time recognizing that an increased minimum wage will result in losses to many businesses. If the minimum wage is increased to $15.00 per hour, he will quickly learn that there are far fewer Scrooges out there and far more operating-on-a-shoestring entrepreneurs. (Fast-food restaurants are not adding self-service kiosks for no reason.)
Placing those other issues aside and returning to the question of increasing the minimum wage, it should be obvious to everyone that businesses, unlike the government, cannot print money. If their expenses go up, they must cut spending (company expansion, advertising, research and development, fringe benefits, etc.) or raise prices—or both. They do not have “money trees” dropping $100 bills all over their property. It is naive to believe that all businesses can pay for increased wages by cutting profits, because the profits are simply not that great for the vast majority of American businesses. The smallest companies are generally the least able to afford a $15.00 per hour minimum wage. Such an increase will put many small companies out of business, while directing their customers to the corporate giants. We may end up with almost no local hardware stores, but even more growth for corporations like Lowe’s, The Home Depot, Walmart, and Amazon. (Some speculate that the leftists want the collapse of small businesses to occur. With only a few huge corporations left to provide most of the consumer goods, the socialists can use a “too big to fail” excuse to nationalize the giants.)
An increase in the minimum wage might mean reducing a janitorial staff from three to two. But that does not mean working those two “to the absolute bone.” If a company is arbitrarily forced to increase the wages of two janitors by 50 percent (from $10.00 to $15.00 per hour, for example) why would they not be expected to work harder? Do workers expect a wage or salary increase in exchange for nothing? Why should an employer be expected to pay a worker more for continuing to do only what he has always done? Grocery shoppers expect to pay more for an 18-ounce package of frozen vegetables than for a 12-ounce package. Would they be okay with being charged the 18-ounce price for a 12-ounce package? If an employer is paying $15.00 per hour for labor, why should he not expect $15.00 worth of value in exchange?
An increase in the minimum wage from $7.25 to $15.00 per hour is an increase of $7.75 per hour. If all the workers who had been getting $7.25 per hour are increased to $15.00 per hour, will not the people who had already been receiving more than $7.25 per hour also expect an increase of $7.75 per hour? Leftists throw the word “fair” around quite a bit. The person who was receiving $15.00 per hour who sees the $7.25-per-hour laborer get increased to $15.00 while he gets no increase will certainly not call that fair!
The point is that the $7.75-per-hour increase would percolate throughout the economy. If the people at the bottom receive an increase of $7.75 per hour, everyone above that level will also expect—and demand—that same increase. Eventually, almost everyone will have received $7.75 more per hour. The result of that will naturally be nationwide price increases—because businesses cannot print money!
A $7.75-per-hour increase is $16,120 per year for a 40-hour work week. Multiply $16,120 times about 164 million people in the U.S. workforce and you get $2,643,680,000,000.00, or about $2.64 trillion in increased wages and salaries. Where do people think that $2.64 trillion will come from? The mattresses of business owners? The money is simply not there. (Even if it were, why should the business owners have to foot the bill for an arbitrary government edict? Should the woman who owns and operates a beauty salon have to get a second mortgage on her house to cover the government-mandated wage increases for her five employees—increases that will cost her $80,600 per year (not counting additional Social Security taxes she will have to pay)?
Where will the money come from? It will come from $2.64 trillion in consumer price increases. It will also come from American job losses, as businesses shift some operations overseas to avoid paying every worker an additional $7.75 per hour. Once the wage increases percolate up through the economy and the price increases trickle down, everyone will pretty much be where they were before the minimum wage was increased. The winners will include the workers who received the higher wages before most of the price increases took effect, the labor union workers whose wages are linked to the government’s cost-of-living index, and the federal government itself—which will receive tens of billions of dollars more in increased income taxes and Social Security taxes. The losers will be people on fixed incomes and at the bottom of the wage scale because prices will inevitably end up going up higher and faster than their incomes. (Bill Gates and Mark Zuckerberg can easily afford to pay $7.00 for a gallon of gasoline and $15.00 for a gallon of milk, but that does not mean everyone can—even with a wage increase.)
Not everyone will receive a $7.75 per hour raise; some will receive smaller increases; some workers will lose their jobs. A small percentage of employers will reduce their profits to help cover the cost of the wage increases. The collective price increases will not go up by precisely $2.64 trillion. But, to one degree or another, all of these consequences will follow a massive increase in the federal minimum wage. You might come out ahead. You might come out behind. You might end up in about the same place as you are now. The problem is that you are not in control. You are at the mercy of politicians in Washington, D.C. In an absolutely free nation, where individual liberty is protected and thrives, you would control your destiny.
The truth is that you can control your destiny. If you are earning $7.25 per hour and want to be paid $15.00 per hour, you should work harder and smarter and improve your value to your employer so that he will willingly and eagerly give you $15.00 (or more) per hour. If you are worth $15.00 or more per hour, he will pay you that rather than lose you to a competitor. When employees work harder and smarter, products can be created and services can be rendered at a lower cost. The increased productivity can yield both lower consumer prices and higher wages. Everyone gains. But when the government arbitrarily mandates wage rates, tens of millions of consumers lose.