The Reality of Minimum Wage

Posted Apr 10, 2011

Everything you need to learn about minimum wage laws can be summed up in two stories:

The year: 2004 (give or take). Location: Ashland Oregon.

The minimum wage was just recently increased, with a new increase promised every year for the next few years.

I'm talking with Vic, the owner of Vic's Mongolian BBQ. (Great place to eat. If you're ever in Ashland, I highly recommend going there.)

Me - "So how do you like the new minimum wage that just went into effect?"

Vic - "I had to fire one of my employees."

Me - "Why?"

Vic - "Can't afford him anymore. So now I have to ask more out of my other employees and I have to work harder myself to cover the gap."

Well, there you are. Wages went up, and someone had to lose their job.

We can go into the math, but long story short is, a tiny $0.10 increase in minimum wage on a small 10-man business equals around $2,000 a year in extra expenses the business has to cover. (It's actually worse when you factor in payroll taxes, insurance, benefits, etc.) A $0.25 increase over 50 employees? 100? 1,000? Well, you get the idea.

Growing up, I've heard lots of folks complaining about sweat shops in China and India where employees work disgustingly long hours for very, very, very low pay.

And now, after many years of people complaining about those low, low wages, we find that India and China are now being considered serious emerging economic powers. (In short, they got money, now.)

Yes, other factors came into play, but the fact that those places allowed such low wages was a massive contributing factor in their economic rise, even though that seems to be a contradiction of facts to many who fail to see the connection between low wages and increased economic power.

The United States of America did just fine without any minimum wage laws all the way until 1935 (or 38, depending whether you count laws struck down by the Supreme Court) I think we could do just fine without them again.

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