PRUDENCE SAYS: I don’t like the concept of minimum wage. Why can’t a person agree to work for an amount of compensation? Why can’t a person offer an amount of money, or, say, ice cream, to get some wood chopped or something, and another free, sovereign citizen agree to accept two ice-cream cones of his or her choice in exchange for the chopping of that wood?
I’ll tell you why: governments can’t tax ice cream. The greatest beneficiary of “raising the minimum wage” is… wait for it… the government! You see, da’ gummints think employers are 1) greedy; 2) lying connivers; 3) stingy and miserly; 4) not to be trusted. Plus, they don’t like them. Everyone knows businesses all have a room in the back that’s full of cash – cash they are just too mean to share with their down-trodden, exploited employees.
What happens when the “minimum” wage is increased? Income taxes increase. Social Security contributions increase. Medicare taxes increase. State income taxes increase. Government types, because they have no understanding of business, freedom, free enterprise, profit and the multiplication of wealth, don’t grasp that all of those revenue increases they are hoping for, aren’t going to happen (with a key exception we’ll get to) and that, in fact, overall revenue will probably go down, as follows:
1) There will be fewer employees overall. Raising people’s pay doesn’t increase sales or profits; it only raises expenses for the employer, as in, raising the cost of goods and services he or she is trying to sell. Government types think the employer can just take less filthy lucre for himself and share it with the least productive, least profitable employees. The employer can only reduce the quality and value of what he sells, or reduce payroll some other way, usually by eliminating the least productive of the least productive employees, and then pay no taxes for them, at all. Indeed, the newly unemployed start collecting welfare from others’ taxes. 2) Lower taxes from less profitable businesses and, here and there, the end of businesses altogether.
Now, here’s the key exception: Many negotiated labor contracts are tied to multiples of the minimum wage. As a result, raising the minimum wage will eventually raise lots of higher wages and we’re back to the real reasons: 1) buying votes with other people’s money; and, 2) raising taxes. How benevolent can they get? People at the bottom are still out of work, of course, except now they are unemployed from a $12 or $15 job instead of a $9 one.
Here’s what may be the worst effect of mandating higher pay for less desirable workers: The cost of discriminating against them becomes LOWER. If a desirable, friendlier, neater, better-performing and acting employee now costs the same as a poorer, less-friendly, less manageable employee, there will be far fewer of the less-desirable actually employed. Prior to the mandate, less-desirable employees had a cost advantage that would encourage employers to hire them for less-valuable tasks. If that cost difference were $10, lots of less-desirable people would get a chance to work. If the difference is mandated to be $0, hardly any will get that chance. Did you know that this was the exact strategy of unions under apartheidt in South Africa? The unions “went to bat” for blacks by insisting that everyone’s wages be equal! Sounded great, but the purpose of it was to make sure fewer white unionists had to compete with black applicants.
Unfortunately, our government “… of, by and for the people…” is demanding that every employer be subject to racial and other quotas, regardless (almost) of abilities to function at a profit. Things are becoming less American bit by bit. I don’t like it.