$15 Minimum Wage: The Reality

I understand the whole concept of people wanting to make more money.  That people want to get more stuff.  Well back in the days to do that you bettered yourself, took chances starting your own business, went to college or trade schools to learn more about jobs that could help you make more money.  Start out at the bottom rung and work your way up at a business.

But now people say we should just more than double the Federal Minimum Wage from $7.25/hr to $15.00/hr.  That is a 107% increase. So everyone has a living wage.  Well I hate to tell you, but minimum wage was never set to live off of.  It was set up for entry level work, meaning you did it for a bit in high school, or entering the work force to learn good work habits, responsibility, etc. and to have some spending money to go out with your friends on the weekend.  It was never meant to be anything more than that.  Why people think that minimum wage should be money you can live on now is totally insane.

I am going to go over a little scenario of a business now and one with the higher minimum wage. Because one thing this Fight for $15 crowd has forgotten is that if their pay doubles, those in skilled positions should go up as well.  Now for this company we are going to say they do $2,000,000 in sales a year.  They, unlike the rest of the businesses are actually going to stay in the United States and refuse to raise prices.  This is an evil company too because it does not provide health insurance to it’s employees.

So with $2,000,000 in sales and 20 employees which we will say for this purpose currently make on average $50,000 a year. Now let’s do some math:

After taking out the $1,000,000 payroll that leaves $1,000,000 left. The materials to make that $2M is $500,000 which just leaves $500,000 left in net profit.  Then you take out utilities for $60,000 (and that is being energy efficient and property rent) Plus another $100,000 between Business Insurances, as well as payroll taxes responsible by the employer.  Which leaves $340,000. We are even going to say the company does no advertising and no other expenses, which I think anyone who has ever ran a business knows is not realistic.  Of course you are still going to get a visit from the tax man, and the corporate rate for the US is 35% taking another $119k off the remaining $340k leaving the owner of the company a net profit of just $221,000 which puts him in his own personal 33% tax bracket cutting that down $72,930 for a total left of $148,070.  So the owner of the business, who puts all the risk and money into the business to get it started and builds it up ends up with 7.4% of the gross sales.  So the reality in this system is he is nothing actually making that much money to begin with if you look at the big picture.

 

Now let’s double the wages. You still have $2M in sales and 20 employees, but now your payroll just went to $2,000,000 a year (20 employees x $100,000).  So right there you are left with no profit at all, but wait, there’s more.  You still have to buy material, which I am sure other companies won’t keep the same prices because they will want to keep their doors open, so the material cost will likely double to $1,000,000, leaving you currently $1,000,000 in the red. Oh yeah utilities are going to go up since if Hillary gets elected energy rates will go up. So we will considered those doubled as well, since rent rates will likely go up as well.  So that is another $120,000, now making the company $1,120,000 in the red. Business insurance and payroll taxes will double as well to $200,000, now leaving the business $1,320,000 in the red.  There would be no corporate tax because the business is in the red or at a deficit. And the business owner would have no personal taxes when reporting that loss.  This would equate to the business owner taking a 66% loss compared to the gross sales.  May I ask how long this business will stay open under these circumstances?

Well there are only five solutions to these problems for employers.

  1. Take advantage of the current trade deals and go to another country to make your product.  This of course will put more American’s out of work, but the Fight for $15 people don’t really care about anyone but themselves. Or are the rich people this would have no effect on to begin with.
  2. Lay off workers to try to keep the expenses down, because ultimately a company needs to make a profit, or what is the purpose of owning one?
  3. Automate: Lay off workers and automate the process. Similar to what is starting to be done at some fast food locations to cut expenses.
  4. Raise your prices.  To match the first scenario for the owner to just make $148,070 after taxes, prices would need to go up a total of $1,660,000 or raising prices 83%
  5. Close your doors.  If you cannot afford to make any profit at all, and actually take a huge loss, is that really fair to you and your family? I do not think so.

Now let’s also take a look at the fact a lot of this support is coming from unions. They also want to sign you up so they make more in dues.  The UAW charges it’s working 2.5 hours of your pay a month (For $15/hr the dues would be $37.50 a month or $450 a year.)  One thing I have never figured out about unions, is why should anyone pay a union to have a job, because that basically makes the unions the pimps.

But the bottom line here folks is that $15/hr sounds great on paper, and if you want $15/hr by all means get out there, go to a trade school, apprentice in construction or other jobs where you can learn higher paying skills on the job.  Start at the bottom and work hard so the boss has to give you a promotion because you are that good and deserve the raise.  Go out and start your own business.  There is only one person stopping you from getting ahead and that is the person you look at in the mirror everyday.  Don’t make excuses, don’t expect the Government to give it to you, because if they do they will own you.  Get out, work hard, work smart and advance your own cause.  If you are old enough to be working, you are old enough to be off the breast milk.  There are no safe zones in real life. So put in the real effort and you can succeed, even when you fail.

 

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One thought on “$15 Minimum Wage: The Reality

  1. Good sense about minimum wage. It’s a starting point, whereby you work your way up the chain by hard work.

    I started work at $1.05 an hour when I began with the post office, and I was glad to get that much since it was about 20 cents higher than the minimum wage. The sorting work truly sucked… you have no idea…paper cuts on steroids…so I started looking around at what I wanted to do.

    I tried various jobs, including being a secretary. While that was better than sorting mail by hand, that job sucked just as much, so I went back out to the sorting floor.

    I saw that the mechanics and electronics technicians had it the best on the workroom floor and they made more money, so I decided on Maintenance.

    It was a tough row to hoe, because there just weren’t any women in Maintenance and, frankly, the men didn’t want women working along side of them…touting that I was taking a job away from a man who has a family to feed. Hey, I had a family to feed too, but that argument didn’t count. But, I did it anyway, bearing the insults, dirty tricks, and downright malicious acts. So, I worked my way up the Maintenance chain, going to college, gaining experience, and I eventually worked my way all the way up to Headquarters, teaching those same mechanics and electronic technicians how to do their jobs. Sweet revenge, eh?!

    That’s the true power of the minimum wage.

    Like

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