Wednesday, May 7, 2014

VICE and Seattle have it all wrong on Minimum Wage increase

Oh poor VICE.  I must admit the VICE show on HBO is must watch TV for me.  Every episode has at least one wonderful story and most of the time both segments are intensely interesting.  VICE provides the kind of reporting that we just get very little of here in America.  They tell the stories that the mainstream media is unwilling to discuss or too scared to put boots on the ground. 

If you have never seen the North Korea episode with Dennis Rodman you simply must.  Riveting would be an understatement.

I also follow VICE on Facebook and get daily news articles from them in my newsfeed.  Unfortunately, these stories blasting my newsfeed are becoming more and more socialist in nature.  Anything about the United States economy or politics seems to have moved way, way to the left.  I guess I should not be surprised since Bill Maher is so heavily involved.

Their leftist and socialist views have been on full display lately.  Today they spewed out an article touting a Seattle based proposal to raise minimum wage to $15 an hour.  The problem with all these Democrat proposals is that they never explain the true economics of such a move.  All Democrats can say is that it will raise the living standards of the poor.

Well true the ones that keep their minimum wage jobs will benefit.  Unfortunately the true economics of such a move are never discussed.  Democrats continue their thinking that money will just magically appear (just look at the fact Obama has added more to our national debt than every single American President combined).  They think money grows on trees or something.

Here is how true business works.

If my small business overhead is $2000 a week in employee payouts, to distribute to 10 part time employees at $10 an hour, each employee is going to work 20 hours each making $200 a week. That's 200 working man hours I need people to put into my business each week. ( pretty simple right?) Lets say min wage goes up to $15 an hour.

Now my overhead in employee payouts is $3000 a week, and $4000 a month more than it was at $10 per hour. So to keep my doors open and still provide working opportunity to employees, I either need to reduce the amount of employees I have, reduce the amount of hours they work ( which is hard because my store is still open for the same amount of hours it was at $10), or increase the sales price of my products, or all three.

So lets say now instead of 10 employees, I have 7. They will get the same amount of hours they received before but at $15/hr. My payout overhead is now 2100 a week, so prices will increase ever so slightly, you may not even notice. But you know who did notice? The three employees I just fired to keep my business running.

Lets say I keep all 10, my overhead now is $3000, so I must increase my price of sales by the same percentage as my overhead in order to afford my business still. So for instance my $8 lunch just moved to $12. Which is inflation since the price increase is equal to wage increase. Nothing changes from what we have in this scenario other than you and your fellow employees pay more tax to federal and to state( which they would L.O.V.E. btw).

So whats our end result? To keep my doors open I have to cut three people from my staff. Could be high schoolers, moms, dads or grandmas who knows. All I know is three people now make no money instead of some. And since I have less employees the quality and assistance of my restaurant will most likely go down due to employees picking up more responsibility and being spread thin.

Or we increase our prices, walking hand in hand with inflation, and driving away the demographic of the people who make more than minimum wage since their pay did not increase what so ever. So in all reality, you don't win, I don't win, my three former employees surely didn't win, and my former customers who used to help fund my business don't win either.

Please tell me how small business ownership will continue in this country if we increase the minimum wage to $15 an hour? The only ones who will be afford to are the multi-million and billion dollar corps. So if working at Wal Mart or Cosco and KFC is your idea of living life to the fullest, by all means rant about how great this will all be if it surfaces. Have fun with this, Seattle.

This basic math is what VICE and the left never discuss.  They just think businesses will say "ok no problem we will just pay more in wages".  Well no they will not.  The wage budgets will not change.  People will lose jobs and prices will increase to meet this demand.

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