The minimum wage, always a hot topic. Today we explain why government shouldn’t be involved.

In 1508, Pope Julius II hired Michelangelo to paint the ceiling of the Sistine Chapel.

“Now Mike, last month Mario and Luigi painted the outside of the chapel.

Because This Matters explains how stuff works

BTM is taking apart and explaining the issues.

To save some money, I purchased paint rollers and large 8-inch brushes at a sale they were having at Walmartio. I want you to use the same rollers and brushes when you do the ceiling. You will, of course, reduce your equipment fees accordingly. As well, I will be paying you the same exact wage as I paid Mario and Luigi. All painters get the same.”

Michelangelo was speechless. Not only did Michelangelo not speak English, nor go by the name of Mike, but he was extremely insulted to have been placed in the same category as ordinary house painters. Not that there is anything wrong with painting houses for a living, that is just not what Michelangelo did. Nor did he see any way to paint the ceiling of the Sistine Chapel using the equipment Pope Julius was going to force him to use.

Pope Julius was very wise and very powerful, but Michelangelo did not have any confidence in this painting system of broad strokes and did not like having all painting jobs treated equally.

Five hundred years later the broad strokes of government trying to force equality still do not work, nor will it ever.

Minimum wage is a hot button topic. One of those issues where some people think they know all the answers. Currently, the federal minimum wage is $7.25, here in Florida it is $8.05 and will increase to $8.10 on January 1st, 2017.

Those fighting for a $15 minimum wage talk about a living wage, social justice, social equality, et. al.  All the emotionally charged rhetoric we have become used to hearing anytime you give progressives a platform. Those fighting against raising the minimum wage will tell you that it will increase unemployment among young people, those most likely earning minimum wage.  Minimum wage jobs are meant to be entry-level “first jobs” that teach teenagers how to be an employee; show up on time, be respectful, follow directions, tuck your shirt in and pick up your pants.  The biggest argument against raising the minimum wage is that broad stroke government programs hurt those they intend to help.

Me? I will give you my answer in a little while.

Some of us are ‘more equal’ than others.

Let me ask, why $15 an hour? Why not $75,000 per year. This way everyone, including 16-year olds working at burger joints, can afford a house, a car, and a boat. Just think what that type of purchasing power will do for our economy!

Here is another idea. Why not let people just do the jobs where they can earn the most amount of money. If you want to be an airline pilot one day, just show up and start flying planes. Pilots make pretty good money.  Maybe people can become neurosurgeons. Lots of money, prestige, respect. Just take your hammer and chisel and head on over to the local hospital.

Forget about all the schooling, testing, licensing, board certifications and experience needed for those careers. That is all meaningless. You need a job that pays well, and nothing should stand in your way.

What say you? You will not trust just anyone to fly a plane or to crack open your cranium? Are you saying that schooling, testing, and experience have a certain value that you are willing to pay for? Okay, but this is going to cause a problem under this whole social justice and equality thing you have got going on.

I know. Not only should we have a minimum wage but why not a maximum wage as well. In the name of social justice and equality these numbers can be the same. Let’s use that $75,000 per year. So, regardless of whether you are an accomplished neurosurgeon, a 16-year old kid working at the burger joint, or a high school dropout day laborer, you will earn $75,000 per year.

While reducing the demand for college diplomas (and thereby reducing college tuition) I don’t see that plan working too well.  It’s a shame because I thought we just solved social justice. Feel free to keep on rioting for the cause.

Four Scenarios

Business A pays its workers $3 an hour. I doubt anyone will work there except maybe meth addicts. Not exactly the crème of the crop when it comes to employees. The work produced and the customer service provided is the worst in the industry. Business A will either have to increase what it is willing to pay for qualified employees or likely go out of business.

Business B pays its workers $18 to start and chooses its employees very carefully. While everyone wants to work for Business B not everyone can. Only those that can deliver the absolute best goods and customer service will get hired. It would do someone well to get experience and work on their skills before applying for a job at Business B.

Customers of Business B pay more for their goods and services but get the best goods and customer service. They appreciate top of the line, they are accustomed to it, and are willing to pay extra to get it.

Business C pays its workers $9 an hour. Employees come and go and the products and customer service are average at best. Customers of Business C are willing to accept less than the best products and customer service. To them, saving money is more important than getting the best products the best customer service. However, going to Business A is out of the question.

Business D pays its workers $7 an hour to start. The work is hard but those that stay for 12 months learn valuable lessons that allow them to earn $30 an hour or more in the second year.  Employees at Business D could make more with easier work at Business C. They choose to take less because they see it as an investment in themselves and understand the future earning potential that exists for them.

Which business has the correct employee pay policy, A, B, C or D?

The correct answer is All of Them. (Even Business A which will soon learn that the current market dictates that they will have to pay more to hire better employees.)

Set the Free Market free !

As private businesses, the owners should get to decide on pay policy. They know how much they can afford to pay, they know the margins and markets they operate in. Such, this should be a decision for the business owner to make and not the government. As free individuals, people get to decide what they value their labor at and what they will be willing to accept for it in return. As free citizens, we have the option of patronizing only those companies that we feel treat their employees well, and conversely, boycott when we feel it is appropriate. If that is what we desire to do.

That is the nature and the beauty of the free market. The government should play no role here nor in any of the 28 million other small businesses that exist, primarily because they do not know what goes on in any of them. There are infinite combinations of wages, work requirements, and benefits, and an equal number of reasons why a person would accept or reject them.

Alas, where there is a government there is a failure.

The City of Seattle raised their minimum wage in April 2015 to much fanfare. They celebrated the increase from $9.50 to $11 per hour and showed how low-wage workers had increased their income 12%, with minimal job loss.  A reason to celebrate unless of course, you are one of those that lost your job. All for the greater good, I guess.

Those celebrating fail to mention that Seattle, the center of the high-tech region, had significant job growth during the same period. Nor do they mention that the wage increase was small, not the full $15 minimum wage. The increase to $15 will happen over the next 5 years. If they really cared about the minimum wage worker, why not all at once?

Opponents of a $15 minimum wage have never predicted a complete economic meltdown. We do predict that minimum wage workers will find it hard to find and keep jobs and get fewer hours when they do. We are concerned with teenage employment, and minority teenage employment, as those initial jobs are stepping stones to being a productive member of society.

Proponents of increasing the minimum wage point to those trying to raise a family on minimum wage. Though they cannot tell you why so many people are trying to raise a family on minimum wage. For that, they have no answer. How about this answer. Many who support the increase are the same people that support job-killing regulations and higher corporate taxes that force investment (jobs) overseas. They also supported people like Hillary Clinton who championed putting coal mines out of business and their employees out of work with no idea where those workers will then be employed, other than minimum or low wage jobs.

It boils down to simple Economics 101; supply and demand. When you demand more of something, the price goes up. When you demand more labor, the cost of labor (wages) goes up.

Wage Against the Machine

Soon after Seattle passed the minimum wage increase local fast food restaurants started replacing workers with automated alternatives.

This came as no surprise to those who understand business. I am sure it was a shock to those well-meaning people in Seattle who decided that they know more about business than those who actually own and run businesses. All too often, when people get elected, they believe some kind magical knowledge is bestowed upon them, as well as the power to defy the laws of economics.

Nor do they understand the laws of physics and how it applies to government. For every action, there is an equal and opposite reaction. For every law and regulation, there is a team of high priced lawyers figuring out how to get around it and a lobbyist spreading cash to create a carve-out or exception for his employer.

The greatest hypocrisy of them all.

I found this on the State Department website. I have no doubt that you can find the same on most if not all .gov websites.

The U.S. Department of State Student Internship Program is an unpaid internship with the opportunity to work in U.S. embassies and consulates throughout the world, as well as in various bureaus located in Washington, D.C. and at Department offices around the United States.  [Italics and underscore are mine]

Well, here is a little situation. The words unpaid and work in the same sentence. In some circles, you could call that slavery. If you are part of the government that writes the rules for everyone else, you can call it an unpaid internship where the experience you gain is worth more than being paid for your work. What happened to the minimum wage? Was Clinton aware of this? Kerry?  Obama? Why is the government allowed to operate under a set of different rules? Who is marching for the interns?

Hundreds of years ago, you had apprenticeships where you got nothing but room and board to work hard for a master craftsman. Over the course of a few years, you learned the skills of that craftsman. Enough so that you can earn a living on your own. If you were good enough you too became a master craftsman and people would be eager to become your apprentice.

Just try that today. The Department of Labor would haul you in for all kinds of violations. Who knows, they might seize your business and your assets. The irony of it all is that your lawyers could very well have documents delivered to them by unpaid interns.

I’m shaking my head, are you?

 

 

 

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