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Why Increasing Minimum Wage By Doubling it to $15 Is Harmful For The US

The current Federal Minimum Wage is $7.25, but there is a “doubling” proposal by various group and media channels that are interested in increase it to $15.  Personally, I think that is a very bad idea, and below are the top reasons why:

Why Doubling the Minimum Wage is a bad idea

  1. Small Employers and small companies starting out will be squashed.  Companies, much like human are born small with a small footprint.  Over time they grow and become larger, at that point they can afford to spend more money because they have more financial leverage to do so.  In fact, as they grow, they make more money by purchasing more skilled labor in the process.  In the recent past, I’ve thought about starting a small business, but I would had a hard time making the finances work because of all types of cost, including human labor.  If minimum wage is increased to over double the current rate, there is no way I could start a business with employees, which leads me to the next point.
  2. Human labor becomes too expensive with wild increases, especially in the United States.  Companies would offshore or automate everything as much as possible and continuously, just to survive.  This isn’t a matter of companies being spiteful, it’s because they couldn’t compete in the market place with such a high US labor cost.  This is basic economics that most people don’t understand because they haven’t ever read economic theory or even had a business where they hire human to work for them.  When the average US worker is paid around $20 in US dollars, and the average Chinese works is paid less than $2 in US dollar, I think making the US less competitive by raising the minimum wage by double seems like a bad choice for US employment.  We all know that the average wage would increase by at least 50% if not doubling itself.  Making the US much, much less competitive in the proverbial “global” marketplace.  Old economist think we still operate in a vacuum, but we don’t.  Now our competition is the guy next door, and the guy next continent over.
  3. Minimum wage is wage minimum, not average wage…  Increasing minimum wage to “average wage” makes it hard for young people to become employed because they are too expensive to train or hire.  I’ve been brainstorming this, and perhaps it makes sense to have different minimum wages based on age and living circumstances.  I’m still playing around with this idea and I might expand upon it in a later idea in a separate post.
  4. Increasing the minimum wage to double the current rate will have an inflationary effect, and at the same time reduce employment.  If I were a small employer, I’d have to increase the price of the product or service that I sell to the public by a big jump, in some case by double and at the same time I would automate and do as much as I could as possible so I could have a viable business.  The sad thing is that the unemployment might not even show the decline in employment because unemployment isn’t the total number of people unemployed.  if you stop looking for employment, you are no longer counted in the employment number… bad statistics, bad… sort of… lol

 

 

Flat-World

Okay those are the main thoughtsI wanted to convey.  I believe in what I typed above and without the intent of trying to sensationalize this communication, which is so common in the media anymore.  Think of it from a consumption standpoint,  Would you still buy milk if it cost $7.00 a gallon instead of $3.00 a gallon (I know, my math seems weird until you realize that there are more costs with a doubling of the minimum wage than just the actual minimum wage itself)…

From an economic standpoint, increase the minimum wage by double would be a bad move and I’m sure it won’t pass Congress.  Sadly certain News media channels will jump all over that story, trying to portray the Congress (and in particular the Republicans) are the bad guys, but in reality they are just protecting you by keeping the country from going into a massive decline and a steep rise in unemployment or underemployment (know that we know the number is not entirely accurate).  The media channels know this, but the sensationalism of the story brings eyeballs to their channel or site.  Kind of sad that a story becomes first than the accurate depiction as to what could happen in the country.  I wonder if the media will ever right itself, or will they just keep pimping themselves out by dishing untrue dirt for profits?

Please share your thought either way if you’d like,

Don

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