The truth about minimum wage

It hurts everyone, especially the poor. Liberals, it's scientifically proven, deal with it. If you don't believe me, read on:

1) Minimum wage creates and encourages unemployment.
Minimum wage removes wage negotiating power for both employers and employees. This is bad for both parties as it raises the cost of production for the employer because he is forced to pay more, and it reduces the marketability of the employee because he is forced to charge more. There are many jobs in this country that people would be willing to take for less than minimum wage. Why? Because they would rather work for something than earn nothing. Assume an employer makes $50,000/month in gross sales and $20,000 of that goes toward payroll. From this he is able, at $4/hour, to employ 125 employees (assuming a 40-hour work week). If he is then forced to pay each employee $5/hour, that same $20,000 can only provide for 100 employees. Thus he has to lay off 25 employees, or reduce every employees' hours to 32/week, or more likely . . . see #2:

2) If an employer's cost of production increases, there is no corresponding increase in profit without a rise in sales value.
Even if the employer reduces his costs by laying off employees, he still has the problem of reduced production capacity. While some belt-tightning is possible by using more steamlined production methods or other technological breakthroughs, the reality is that nearly all of the increased labor cost will have to be passed on to consumers. This is because . . . see #3:

3) Minimum wage jobs are primarily in basic production industries.
This is bad because each stage of production is hit by the raised cost of labor, each increasing the cost to the next employer and ultimately to the employee. Which leads to . . . #4:

4) Minimum wage sends jobs oversees.
Why pay for expensive American labor when an Indian can do just as good a job for 1/10th the price? Did you know that in America the average auto assembly line worker makes $26/hour compared to $0.10/hour in China? I'm not kidding! That's 0.03% as much! It's no wonder that American companies are shifting production oversees. Can we ever compete with communist-run China when it comes to slave-labor prices? No. But we don't have to. We simply need to lower the artificial restriction of minimum wage so that the cost of production will be reduced enough that the advantages of local production offset the lower labor rates found in third world countries. The problem is that we are not eliminating minimum wage, so we continue to outsource labor to other countries. Besides the obvious job loss, there is another problem . . . see #5:

5) Outsourcing reduces our nation's ability to produce basic products in an emergency.
Am I sounding paranoid or just thinking the problem through? What happens if we are content to outsource basic labor jobs to the point where the skills no longer exist in our country? What effect would this have if we ever had to stand on our own, against a trade embargo? This is topic is probably best explored in a future blog, so I'll get back on topic . . . with #6:

6) Minimum wage hurts everybody's bottom line.
If an employer is required to pay $5/hour for a position that he wants to pay $4/hour to fill, inevitably he must raise the sales price of his widget to compensate for the increased production cost. As most widgets (cardboard, gas, steel, etc.) are produced in order to be used in the production of other widgets (boxes, commercial transportation, car bodies, etc.) this raises the cost of production for the next employer who in turn must raise his sales price. This goes on and on until the finished product (computer packaging, potato chips, automobile, etc.) is sold back to the employee. The problem is that the employee getting $5/hour instead of $4 thinks he is earning more. Unfortunately the items he has to purchase go through two, three, four or more stages of production. This means that the cost of production increases due to minimum wage several times, not just once. This means that the end product is sold to the employee at a proportion in excess of his theoretical "raise". And this means . . . see #7:

7) Minimum wage hurts the poor more than it hurts anyone else.
While the increased costs of consumer goods means that everyone has to shell out more for groceries, the poor suffer the most. Why? Because they have the largest proportion of their income allocated for non-discretionary spending. I.E. They spend more of their money on food, as a percentage, than more wealthy people. Sure, a rich guy may pay more for his Corvette because of minimum wage, but he could always choose to not buy the Corvette and get a cheaper car. The poor guy, on the other hand, doesn't have a lot of choice when it comes to buying toilet paper - it's pretty important. I know this is a rather simplistic example, but I hope you see my point . . . of which I have one more, see #8:

8) Minimum wage costs the poor more in taxes.
How? Because they are earning more, there is more to tax. The increase in income can, in some cases, even push them past the point at which they are eligible for government aid. In any case, they must pay more to the government in the form of taxes, all while paying more for products they need. It's a lose/lose situation.

So, what does all this mean?
In layman's terms, we all lose money any time the minimum wage exceeds what an employer would naturally pay an employee in a free market - but the poorest Americans lose the most. There is an evil irony in the fact that the very people receiving minimum wage are the ones most hurt by it. It is even more ironic that minimum wage only exists because liberal politicians push it as a means to help the poor.

Liberals, if you really care about the poor in this country, stop allowing your representatives to pass measures which inflate the cost of living. Conservatives, if you really care about business, stop voting for politicians who "compromise" by raising minimum wage slowly. Minimum wage hurts everyone, and it's time to stop!