I remember when I first started working as an employee for Hardee’s restaurant in Logan, UT. I was a poor college student trying to pay my way through the college scene. I was making $3.35/hr. The year was 1987. The economy was good and there were plentiful jobs to be had. For a college student, you can’t really expect much more than a minimum wage job. Employers who hire students typically have an understanding that the working hours must be flexible and changing.
I recall one of my roommates, Wade Hansen, was from Preston, Idaho where his family ran a mink farm. One day Wade asked if I would like to go with him to his farm and help with the mink breeding. He agreed to pay me $7.00 per hour. Of course I could not say no to that! I would make more than double my current wage at good old Hardee's.
So today I am doing the math and realized that my $7.00 per hour wage that I was so ecstatic about in 1987, would not even meet the federal minimum wage of 2013. Oh how the times have changed. Talk about inflation! Now, have you ever stopped to think of what the biggest causes of inflation are? Foreign oil prices? Perhaps that is a large factor but when you really think about it, the increase in minimum wage that was for the purpose of bringing people up at the rate of inflation, has actually been the root of the inflation.
How do I come to this conclusion? Let’s take McDonald’s as an example. This is a place that typically hires people at minimum wage. McDonald’s trademark burger “The Big Mac” cost $4.56 on average and the minimum wage is $7.25 per hour. So what will happen to the Big Mac cost if the minimum wage is raised to $10 per hour as many are trying to make happen? I would assume that the Big Mac, which is not my favorite burger in any way, would become too expensive for the average fast food connoisseurs. And this is my thought process.
Each of the ingredients used in the Big Mac, from the tomatoes to the cheese to the buns to the beef, are all produced on farms around the country. Workers work to harvest the tomatoes and grain. Workers work to extract the milk from cows to make cheese. Workers work to raise the cattle and butcher the meat. Each one of these workers who was making $7.25 per hour are now making $10 per hour. Then you take all of the products via transportation to the processing plants. The drivers and plant workers are now making $10 per hour. Then the prepared product is transported once again to the distribution centers and then to the individual McDonald's in your home town. The part time McDonald’s employee who is working to pay his way through college is now making $10 per hour to take your order, cook your burger and wipe your table.
So the Big Mac is now $9, so that McDonald's can still make a profit and keep you fed. The minimum wage worker cannot afford that burger so he begins the process of raising the minimum wage again. So using this methodology, a Big Mac will cost about $25 in 2025. I don’t know about you, but McDonald’s would be lucky to get $4.56 from me for a Big Mac in 2025!
Food is one of the few items that we can get around this issue. If we are motivated enough to go out and till some of our backyards into garden area, we could provide much of the food we require. But what do we do with all the other necessities that we will need? Like medicine. If you don’t think that it will affect the medical field let me help you out. A doctor has to eat too. If the food prices are going up then he needs to make more as well. How does a doctor make more? Or a mechanic? Or a plumber? That’s correct, they charge more.
So in conclusion, my personal opinion is that minimum wages are not helping anyone really. My math may not be an exact science but it is relatively close. And like my Grandpa used to say, close only counts in horseshoes, hand grenades, nuclear war and occasionally…. math!
That’s my scoop! What do you think?
So since you ask...
ReplyDeleteThis is a topic that has really fascinated me recently, here in Seattle there is talk of raising the minimum wage to 15 dollars an hour and they already raised it to 15 in nearby SeaTac.
I don't think the story you tell about wages and prices is wrong necessarily, but I don't think it's the whole story. We could also talk about the other story where those that make the least in our society (minimum wage earners) spend the greatest portion of their wages on consumption (which is by far the largest driver of the economy). Putting money in their pockets will have a ripple effect through the economy as they spend more money of things like food and other goods. But then again what if employers have to lay off some workers because they are too expensive? Then their income drops to zero and how does that effect consumption?
The question is, does a minimum wage make society better off, worse off or does it even make a difference? That's a really hard question to answer because it depends on so many things that can vary drastically by location.
For me the interesting story is the one at the end of the article you linked. The article talked about the woman struggling to feed her two children on a minimum wage. What do we do about this sort of thing? Well she already gets food stamps and temporary cash assistance(this seems to me almost like the tax payers are footing the bill for the miserable wage she earns). And still is on the brink of homelessness. Should we cut her benefits? Give her more? Send her to school? Increase the minimum wage? I honestly don't know. But I do know that there has been a structural change to the way our economy operates in the past 20 years.
The fact of the matter is that labor is going out of fashion. It's not worth what it used to be. So what do we do with all these poor people? If increasing their income isn't the answer then what is?
I agree with a lot of what you're saying Dan. I think there is a lot that can be done. You make a really good point that the value of labor has changed drastically. Everyone wants more for less. I believe that much of this is being taught in the public school system as well as by many parents today.
DeleteThe part of businesses that haven't changed drastically is the fact that workers who excel at their jobs and choose to be efficient and good at what they do, almost always get moved up the ladder. Even in McDonalds. The crew leaders are not typically selected from the pool of lazy and unreliable workers. And those crew leaders that worked a little harder to receive the promotion and the extra dollar or so per hour, will now be caught in an interesting scenario should the lazy workers all be given an automatic doubling of their wage. Do you still give the crew leader $1 more per hour? Is that all they earned. That makes their 12% raise from $7.50 to $8.50/hr only worth 6.5% more based on the $15 vs $16/hr.
I will personally never be a fan of the minimum wage. I believe that the market can take care of itself. If you offer wages that individuals are willing to work for then you should be able to hire at that wage. That is competition.
Though I feel bad for the single mother of two, I don't feel that the minimum wage is the answer. I think that government assistance is ok in that circumstance. But too many people are looking for and expecting more for less and that is the where the problem lies. Nothing is free. The government should keep it's nose out of it. Taking away from successful, hardworking people and handing it out is morally wrong. That is not compassion. That is control and abuse of power.
It's probably a discussion that will be debated much in the future much as it has been in the past. I may be way off base but having lived long enough to experience poverty, hard work and success, I know that I can be whomever I wish to become and the government can only hinder that dream. They cannot assist it or enhance it.
This is interesting. I'm guessing this would be a common reaction anywhere in the country. http://www.youtube.com/watch?v=LLr5oWfoWRY
ReplyDelete