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and a way to fix it. I am going to be using my evil capitalist alter ego, just like Landshark uses an alter ego in the 2004 results forum.
As a special education teacher, I am conversant with the UNFUNDED MANDATE problem. An unfunded mandate is when a legislative branch of the government (usually the feds) makes a law that requires states or localities to spend money, but the legislating body gives no money, just the mandate to DO IT. A program is set in motion without the money (or without enough money) to fund it; the localities are forced to come up with more money on their own.
The minimum wage, as it has been implemented in the past, is an unfunded mandate. How? This is how it works. I am going to give three examples (all the same, only a matter of degree or size) so no one will say that minimum wage only affects certain sizes of employers.
I am going to suppose that I am in charge of (one at time) three different sizes of business: small, medium, and large. In all three cases, there are some basics involved.
First, I (as EVIL Strong Atheist) am of course an evil capitalist; I demand that I MAKE A PROFIT. If there is no profit, I will relocate or close up business. That is a given for me, EVIL Strong Atheist/capitalist.
Second, no matter my business size, or what I am producing/making/giving as a service, I have fixed costs (overhead). My facilities, rent, utilities, cost of materials, loans to pay back, employee insurance, employee health benefits, employee retirement benefits; all these things add up to regular expenses that have to be paid, just like an individuals' monthly mortgage, gas, heating, electric bill, etc.
In addition, I have competitors who will try to undersell me; I have to make sure that I can not raise my prices too much or business will go to my competitors.
So, with these givens, let us look at my costs to employ people. After all of my overhead costs, I have the following amounts that I can spend to employ people:
small business owner : $30 an hour total, full time employment medium business owner: $300 an hour total, full time employment large business owner : $3000 an hour total, full time employment
For purposes of this exercise, I am going to make two further assumptions that are not always true, but close enough in reality to show my point. The first is that minimum wage is currently $5 an hour (I KNOW it is $5.25; I could make the same arguments with that figure, I just wanted to make the math easier, ok?). The second assumption is that all my employee money is going to minimum wage workers; I am not paying anyone more than that because I am AN EVIL CAPITALIST who does not want to spend a dime more than I have to.
Ok, how many people can I employ?
As a small business owner, I have $30 dollars an hour to spend. The minimum wage is $5 an hour, so $30/$5 = 6 people. Cool. I hire my 6 peons to produce my widgets. As a medium sized business owner, I can hire $300/$5 = 60 employees. Fantastic! I stick them all in my sweatshop. As a large business owner, I can have $3000/$5 = 600 slaves in my massive factory!
Now, into my happy world, the government changes the rules on me suddenly. A new minimum wage law is passed! The new minimum wage is now $6 and hour. Note, my overhead expense are the same. My competitors are the same; if I raise prices they will undercut me, and I will lose business (and more important, MONEY). My desire to make the same profit I was making before is the same; the only thing that is different is the increase in the minimum wage; a cost to me that is not being offset by the government (an UNFUNDED MANDATE; it would be like if your salary did not change, but the price of gas and heating oil went up, you would be squeezed).
So now, how many people can I afford to hire? I still have $30, $300, and $3000 dollars an hour to spend on salaries.
As a small business owner, I have $30/$6 which equals 5 employees, instead of the 6 I had before. So I continue to pay 5 of my employees at $6 an hour (not much of a change in THEIR income), and fire one employee (1/6th of my work force). My business is hurting, and everyone has to do more work.
As a medium business owner, I can now hire $300/$6 = 50 employees. I fire 10 employees (1/6th of my work force), and pay the rest a pittance more ($6 an hour instead of $5).
As a large business employer, I have options. I can go from having $3000/$5 = 600 employees to having $3000/$6 = 500 employees, firing 1/6th of my work force. Or, I can get pissed at this sh** (I mean, they make me treat my slaves well with OSHA, tell me who I can and can't hire (with EEOC), make me clean up my messes (with EPA), and now they are adding another expense to my cost of doing business!). This is the last straw! So long, suckers, I am closing my business here and reopening in China, or Mexico, or India (because I have the MONEY to relocate), where I can hire 6000 people for $3000 dollars; and I don't have to have any of this other regulatory B.S.
*********************************************************************** No longer EVIL Strong Atheist/capitalist swine ***********************************************************************
How can this be fixed, so that minimum wage can be increased? My proposal is that the feds fund most or all of an increase with some combination of tax cuts to business to offset their increased expenses and/or handouts to business to make up the difference in cost of employment. This would require tax increases. One or both of these would offset the business losses due to increased cost of employment.
I am open to other ideas; just keep in mind that the business loss due to increased minimum wage is REAL.
Putting on my flame-proof suit .... and done! Fire away!
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