Wednesday, February 20, 2013

Three reasons why raising the minimum wage is a Bad idea.

I am going to throw my hat into the political commentary here for just a minute. 

It has recently been suggested the federal minimum wage should be raised to $9.00 an hour, which is $18,720 annually working 40 hours a week.  That is not very much money to live on, or support a family.  The current minimum wage is $7.25($15,080) an hour for nonexempt employees.  This is a 25% increase.  This may seem great, unless you dig deeper into the affects this will have on living.

This brings me to my first reason why raising the minimum wage is a bad idea.  The cost of living for everyone else goes up.  There is also an increase in the cost the employer has to pay. Remember, the employer matches the Social Security and Medicare taxes taken out of your paycheck. (I believe it is referred to as FICA)  This is 7.65%. or at $7.25 an hour, FICA is 55 cents an hour.(or 1100.00 a year).  Then at $9.00 an hour it would be 69 cents an hour (or $1400 a year).  This will raise the cost for operating any business and therefore raise the cost of goods and services.  Say good-bye to the Value menu.  Who will be hit hardest by this increase?  In my humble opinion seniors who are on a fixed income will be hit hardest.  No real evidence on my part.  As I ponder this, I find that seniors, living on a fixed income, are not able to handle 25% increases in their monthly expenses.  Gas goes up, food prices go up, and cable bills, cell bills, and insurance costs, and medical expenses.  (Although to be fair, according to our current President, his healthcare bill will decrease the cost of healthcare.)

The second point I want to put out there is the increase will diminish all the hard work skilled labor has put together.  A skilled copier technician, who has trained and worked for the past 5 years learning about his trade, his work is now diminished.  He is no longer rewarded for all the work he put into improving himself.  The company is forced, by the Federal Government, to pay more for unskilled labor positions, and therefore not able to pay the skilled person any more money.  The cost of living goes up, (see point 1) and it will take longer to get raises, because the unskilled labor force costs so much.

The third point, the increase will remove opportunities for young people to work and get experience before they are a burden on the government.  Small jobs, afternoon help, and assistance for small companies are paramount to their success.  A young person’s first job is normally not a high skilled position. Small business costs will make it very difficult to hire part-time help.  The increase in the cost of labor to assist with running a small company would cripple the company.  Most small companies that I know of operate in the less than 5% profit range.  They tend to operate from week to week or month to month.  The big box stores will be able to handle the increase; they work on the bases of volume.  Not the small company.

Think long and hard before you decide to burden small companies and seniors with the raising of the minimum wage.  The minimum wage in Washington State is $9.19, it is 61% more expensive to live there than Jacksonville FL. 

Just saying.

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