The Minimum Wage

So April 15 was, as always Tax Day. The day that we the people give the government our money. This year, April 15, saw massive protest of people demanding that the Minimum Wage be more than doubled to $15.00 an hour. This is something that this conglomerate claims is necessary because everyone deserves to make a “living wage”.   I want now to take a serious look at this push to raise the Minimum Wage. I will break it down, by looking at the numbers, how many people make minimum wage, who are they?  I want to look at the actual affect of raising the minimum wage, will the increase in wages actually result in improving these individuals lives?  Finally I will discuss just who it is that is actually pushing for this increase in the minimum wage.

Understanding the validity of raising the minimum wage begins at understanding just who it is that makes minimum wage.  Seeing the protests in the streets would lead some to believe that a large portion of the population is being forced to exist solely on minimum wage.  If this is truly the case, then there is an credible issue plaguing the American People.  I personally would not be shocked to find out that in the stagnate economy brought about by the failed economic policies of President Obama, and business being crippled by Obamacare, that the number of people making minimum wage has sky rocketed.  So I turned to the federal government for answers.

According to the Bureau of Labor and Statistics in 2014 there were a total of 77,207,000 hourly paid workers in the United States. Of that number a very small number of people actually earn the minimum wage. The number of people 16 and older that work for minimum wage makes up 3.9% of the hourly paid workers, 3.9% (the actual percentage is 3.875 they rounded up). That works out to about 2,992,000people nationwide, or about .94% of the American population are making minimum wage. Of those people 48% are young adults ages 16-24. Those are mostly made up of high school and college students. The remaining 52% are 25 and older.
It is the 25 and older age group that most people focus on. These are the people who are likely trying to survive on minimum wage. According to the Bureau of Labor and Statistics there are currently 1,549,000 people ages 25 and up are earning minimum wage. That works out to 2.5% of the age group. Compare that to 9.4% of people 16-24 who earn minimum wage. Very few adults are earning minimum wage.

So the number of people making minimum wage is actually infinitely small in comparison when compared to the rest of the population (.94%). Now that we understand that a make up of the people who earn minimum wage, and we understand that they make up a very small portion of the working public, the question becomes will raising the minimum wage actually help these people? What would the effects on raising the minimum wage be on our economy? These are questions that must be answered, before one can make a legitimate decision on raising the minimum wage.

The basic premise behind the idea of raising the minimum wage is a simple, elegant, and very easy to understand. The government says you have to give people a raise. These people then have more money which they can use to support themselves, their family, and improve their lives.  This theory is all well and good, however, like most progressive ideas it is horribly flawed. Like all progressive ideas it places the blame for income inequality at the feet of businesses, it assumes that wages are just plucked from thin air.  It also assumes that wage, prices, and inflation exists within a vacuum.  A simple understanding of economics is enough to reveal the folly of raising the minimum wage.

Economics is the study of the relationship of curves, changing one variable changes the relationship between the curves.  Understanding the relationship between these curves proves that wage, price, and inflation are fundamentally linked. You cannot change one without affecting the rest. These relationships are changed via market force, altering the minimum wage is an artificial change that has a major impact on the markets.

By now I hope that most people are aware that the primary argument against raising the minimum wage deals with prices.  A business exists to make money, it does not matter what business it is, its sole purpose is to make money. Microsoft does not exist to sell the Windows Operating system, it exists to earn a profit, this goal is achieved through selling the Windows operating system.  McDonald’s does not exist to sell hamburgers, it exists to make money, it achieves this goal through selling hamburgers.  It is because of this single purpose that raising the minimum wage has a negative impact on the very people it is intended to help.

Raising the minimum wage increases the cost of doing business, thus it decreases profits.  Now in the progressive mindset, this is okay, because the company exists to create jobs, not make money.  However, businesses that exist to create jobs do not last long, as they run out of money.  To maintain revenue streams,  and thus survive, companies have limited options to survive an increase in the minimum wage.   They can either raise prices or cut costs.  If they raise prices, they risk driving customers away.  If they cut costs they have to either reduce quality, which again pushes customers away, or sadly reduce the price of man hours.  Sense the government forced a wage increase, the only way to do this is either cutting hours, or cutting workers. None of these options bodes well for those making minimum wage.  Yes they are making more money per hour, but they are working less hours, or they aren’t working at all.

This argument is very easy to understand, but unfortunately it is flawed, more correctly it is incomplete.  It fails, in the same way that the progressive argument for raising minimum wage fails to see the connection between wages, prices, and inflation.  Yes it points out that companies will raise their prices to maintain their profits, however this argument focuses just on the fast food chain.  Prices are not set by companies,  McDonald’s does not get to charge whatever they want for a hamburger.   The price is set by what the market will allow.  Consumers set the prices, not companies.

In economics there is something called a demand curve, it deals with the relationship between the price of a good and its effect on the demand for that good.  Prices are set not just plucked out of the sky, but rather by finding the ideal point on the price demand curve, where profits are optimized, prices are as high as they can go without sacrificing demand.  The question of course is how does this apply to raising the minimum wage, if prices are set by consumers, what is the big deal about raising the minimum wage?

Raising the minimum wage increases the cost of doing business, which adjusts where price must be in order to make a profit.  More importantly, raising the minimum wage affects the demand side of the spectrum. Demand is based on how much a consumer is willing to pay for a product. If a consumer suddenly has their income doubled, they are suddenly willing to pay more for a product. Demand increases, the cost of doing business increases, thus prices increase.  This price increase affects all of the country. It reduces all of our buying power, something that will be felt the most by those on the bottom, those making minimum wage.

So raising the minimum wage affects less than 1% of the overall population.  It negatively affects this group of people because it reduces their purchasing power.  So who is pushing for it, and why? If such a small percentage of the population is earning minimum wage, who is organizing them, who is pushing them to get out and protest, to demand an increase in wages? Well the answer is simple, the Unions and of course the Democrat Party.

Big Labor, aka the Unions, have been pouring tens of millions of dollars into the campaign for a $15.00 minimum wage. The S.E.I.U. has been a huge supporter of the $15.00 minimum wage.  What does that have to do with anything? I mean isn’t it the job of Unions to increases wages for workers? Yes, but ultimately Unions now focus less on increasing workers wages, and more on acting as political action groups.

Unions are in trouble, they are slowly dwindling out of existence. In 1983 20.1% of all workers in the country were in a union, a number that has steadily been falling until now in 2014 only 11.1% of workers are unionized.  So why is that important?  Unions are funded through union dues. Workers have to pay money to the union to enjoy union benefits.  The union the uses that money to act in the interest of the workers (well they are supposed to). With the number of union members slowly falling sense the 1980’s, that means the amount of money flowing into union coffers has been slowly falling.  This means that the unions have been slowly losing power.

If you are a union employee the union losing power means that you are getting less for your investment. If you are a Democrat and the unions are losing power, that means it is getting harder for you to buy elections.  Now I know that people are scoffing, how dare I accuse Democrats of purchasing elections, we all know that it is greedy Republicans who do that, because Harry Reid has told us how evil the Koch Brothers are.  Well, it must be nice to have the media in your pocket, because it becomes easy to spin narratives.  From 1989- 2014 of the top donor to campaigns has been Act Blue, a Democrat political action group. It is followed closely by the American Federation of State, County, and Municipal Employees.  In fact six of the top 10 donors from 1989- 2014 were unions.  Wouldn’t you know it, the SEIU comes in at Number ten donating $32,252,379.6 (84% of donations) going to Democrats.

Again, I know the question sitting on the foaming lips of enraged progressives remains “what does this have to do with minimum wage?”  Union wages and salaries are based on the minimum wage.  If the minimum wage goes up, Union wages go up.  Union wages go up, dues go up.  Suddenly the Democrats interest in this makes a lot more sense. I understand now why the SEIU is such a big supporter of this.  Almost doubling the baseline of their salaries, very tempting.

Now that you realize that,  4,600,000 million union members would see their wages go up, as well as the 2,992,000 who earn minimum wage, suddenly the number of people getting a wage increase is going up. Thus the negative affects of the artificial increase in wages is far greater than previously thought.

Suddenly the recent push to raising the minimum wage comes into perspective. It is not about helping fast food workers, it is about ensuring power for the Democrat party, It is about Unions flexing their ever diminishing strength.  Raising the minimum wage will only help Democrats stay in power.  Market forces will adjust prices out of the reach of those on minimum wage, bringing us back to square one.

Raising the minimum wage is a short term solution to a problem that does not really exist.  Only 2.5% of hourly paid individuals over the age of 25 are actually earning minimum wage.  This “problem” is just another in a long line of progressives  “you are a victim” campaign of division.  It is a pathetic ploy intended to pad the pockets of Democrat donors.

The only long term option to helping people making minimum wage is to grow the economy, thus opening doors for them to climb out of poverty.  This can only be done by getting government out of the way and allowing market forces to create opportunities for people to capitalize on. Pushing to raise the minimum wage is a political stunt, that will do nothing to help those earning minimum wage.

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