Increasing the Minimum Wage and Growing Money on Trees

A wee bit of thinking is required to conclude whether raising the minimum wage will help.

First, ask who pays the increase? Answer: the employer. Now imagine a small business owner who pays her 10 employees $8 per hour and is now forced, by our ever-intervening federal government, to raise their pay to $10 per hour.  This is an increase of $2 per hour times 10 employees times 2000 hours in a work year which comes to a grand total of $40,000. (I’m using round numbers to make the math easier). That is $40,000 off of her bottom line and for many such employers that would amount to a significant chunk of the bottom line if not the entire bottom line.

So, what is this employer going to do? Swallow the costs? Of course not. She has 2 choices, lay off two employees to keep her payroll costs from going up, or raise the price of her products/services. If she lays off two employees, which two will she lay off? The best two ? Of course not. She will lay off the worst two, the two most in need of a job to help them continue to develop their skills.

What if, instead, she decides to raise the price of her products/services? As we all know, when the price goes up, demand goes down, meaning her total sales will go down. So, with costs up and sales down, she has less profit with which to continue growing her business and therefore diminishes her ability to hire future employees.

So, by increasing the minimum wage, we give a few people a pay increase at the expense of either taking away someone’s job today or taking away someone’s job tomorrow. Either way, raising the minimum wage could not possibly succeed in improving the economy any more than an edict from Mr. Obama commanding money to grow on trees could succeed.


One thought on “Increasing the Minimum Wage and Growing Money on Trees

  1. I agree 100%. Have people never seen a supply/demand graph? Raising the minimum wage mostly results in hurting the economy not helping it

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