Sunday, September 7, 2014

The Minimum Wage Debate: You Have Never Thought About "One Hour of Work"

If you think raising the minimum wage  - or even the existence of a minimum wage - is a good idea, think again.

Whenever a hike is mentioned, pundits actually ask a very good question:
Why not make it $20 an hour? $100 per hour?
Have you answered that? Because that's only a matter of degree. It's logical to ask that.
The fact of the matter is that there is an effect on cost that is invisible unless you know how the market for labor works. When you hike the minimum wage, you devalue the dollar immediately and for real. This is because there is no change in the amount of work obtained for more dollars!

Let me spell this out for you.

The DOLLAR is a marker, which people use for trade. Left to themselves, people decide how many dollars are appropriate to trade for a product or service. There is always a ratio of the number of dollars needed to obtain a product or service, and this ratio is established by the customers. It is known as "what the market will bear".
When speaking about a service, that is, labor, there is always a unit involved:  
One Hour Of Work.
Now, there is a fundamental quality to this which no one seems to realize. One Hour Of Work cannot be changed by anyone - not government, not an individual... and satisfactory work always has the same quality to it: the Hour Of Work produced the desired result.

Now, here comes a government agent, who or which has decided that the long-term effects of legislation are insignificant next to the good will and votes available by appealing to that mysterious demographic, "the poor", and people sympathetic to their plight. Somehow, it is impossible for an American to "earn a living wage" without government action.

 (You MUST IGNORE the success of immigrants for this case)

The agent declares, by law, that One Hour Of Work must cost at least X dollars. Now, the ratio of the number of dollars needed to obtain a product or service is established by the government.

The law has just set a number of dollars as being worth One Hour Of Work. When that number is increased - by the SAME entity which establishes "full faith and credit" for those dollars - the actual value of each dollar is immediately decreased.

Glue this to your forehead if you will forget it - legislation cannot change an hour of work. It can only change the number of dollars required to pay for it.

Maybe I should say that again for you, since a lot of people don't seem to get it:  legislation cannot change an hour of work. It can only change the number of dollars required to pay for it.

And have you noticed this? "Government", or the employer, is not paying the unskilled worker more - YOU ARE. It is always the customer who pays the cost of any business. You are not changing this, either.

Want a great example? Look at any Federal facility, like Savannah River Site. Workers there make quite a bit more than minimum wage, which you might grant because of the hazards of handling radioactive waste -- but will you get more work if you raise their pay? NO. The work is determined by the process, not by wage legislation. If they - I - were granted a raise, you, the taxpayer, would pay more for the exact same tasks.

How do you like that idea?

Here's what happens in the workplace, courtesy of Andy Puzder, CEO of Carl's, Jr:
“For example, Apple did $39.5 billion in business last year, and only has 97,000 employees. So they made about $407,000 dollars per employee, which gives you a lot of latitude to increase wages, if you want to do so.
In the retail segment, if you take all 22 retailers on the Fortune 500 and add them together, they did about $34 billion in business last year, and … made about $6,300 dollars per employee.
Now if you give a minimum wage employee an increase to $12 dollars an hour, rather than making $6,300 dollars an hour on employees, you lose about $1,100. If you give them a raise to $15 dollars, you lose about $6,000 dollars per employee.”
It doesn't matter if we talk about Andy Puzder or you: you must make money to keep your business open.

Remember asking when you would ever use algebra in the real world? Well, here you go: what happens when you add the same amount everywhere? Yes, when you hike everyone's pay, nobody is better off. They just feel that way momentarily because they see a bigger number on their paycheck.

Go look on the shelf at the supermarket, at the gas pump, in a jeweler's cabinet and see what you're supporting by way of price hikes. It's not "them" - it was you, supporting minimum wage. One of the reasons illegal immigrants are here and textile jobs are overseas.