Minimum Wage

Minimum Wage is Complicated

The problem with every approach proposed by liberals that they are looking at it only from the perspective of the employee and also from a short-term perspective, but, alas, that is only a small part of the discussion.  The first issue that needs to be understood is the reason behind paying an employee just minimum wage.  Most often the answer is simple – the employee does not provide labor which has a greater value than the minimum wage compensation paid.  This is part of which makes the discussion so complicated, contrary to the opinion of liberals, not all labor has the same value to the business owner which explains why some people, like a welder, are paid more than a common laborer.  This skill, welding, makes the time invested by this employee more valuable to the business owner than the employee that carries supplies and cleans up.  

The real question has always been simple: "What is the intent of a legal requirement that minimum wage be increased?"  If everyone is honest with themselves, the real intent is to provide the means for the lower skilled employees to take home more money than is being taken home now.  The resulting question is, once again, simple: "Is creating a legal requirement to increase the wages of the unskilled worker the best way to increase the take home pay?"  And, once again, if everyone takes all of the resulting implications into account, then it would be agreed that this is a terrible way to increase the take home pay of these unskilled workers, the better solution is to provide the needed training to create skilled workers.  Liberals do not like this approach because it requires an investment in time, energy and effort by the employee, eliminating the ability to claim that the result was the effort by the liberal.  From a political point, liberals want to be that people that give everyone what they need, based on the choices of the liberal.  By changing the source of the earnings, the dependence on the liberal is removed and now the employee is responsible for his own forward momentum.

If the solution of a minimum wage increase is examined in the long-term then the results are counter-productive.  In the short term, there will be a resulting increase in the appearance of wages increasing because rate per hour has changed but will the actual take home pay change, probably not.  This answer requires understanding the nature of business and the underlying basis for all business is simple, the owner wants to make a profit.  A profit is nothing more than revenues reduced by the costs required to operate the business.  The legal requirement to increase the minimum wage does nothing more that change the hourly rate but in order to stay in business, the owner must reduce the hours to the point where the costs remain the same, based on the amount of revenue.  If the owner is unable to maintain the profit then the owner will do one of three options: 1) reduce hours, 2) reduce staff, or 3) increase prices.  The problem with increasing the prices manes that the business will no longer be competitive and will lose business, requiring greater reductions in the staff costs or bankrupting the business.  The problem with reduced hours or reduced staff means that the amount of take-home money has not gone up, it simply appears to be higher because the rate per hour has changed.

In the long term, the take home pay will drop or it will be less effective because the prices, across the board, will increase.  This is an easy prediction to make because increasing minimum wage legally changes the paradigm of the wage structure and will result in all wages going up over time.  Every employee's compensation in every business is the result of a relationship to the employee paid more and less.  Each employee's pay is based on his labor being worth slightly more than the lower employee and slightly less than the higher employee and this structure does not disappear just because the law states that the minimum wage is now fixed at a new level.  The new minimum wage impacts not only the employees that are paid minimum wage but also every employee paid less than the new rate.  Remember that the employee caught in the middle are paid more than miinimum wage for a reason and want that difference to be maintained.  Employers understand that an employee can go someplace new and be paid a wage more in line with the value of the labor as compared to the lower employees and employers do not want to lose employees because of the issues with training and break in the work-flow.  So, now the impact of the new minimum wage standard begins to have an impact, over time, every employee will look to find a way to maintain the percentage differences that existed in the past.  All of the new wages will have the long-term effect of driving up prices, everything will be impacted over time because there is a labor component in every product and service.

Once again, in the long term, the desired results will fail because the increase in prices will offset the increase in compensation because the hours have probably been reduced to control overall costs within the business.  In the short term, there is an appearance of success but that will fade quickly as businesses find ways to reduce costs to stay within the limits imposed by the revenue stream.  The business owner has a desire to maintain the profit levels, however, the business owner will not incur a loss in order to provide jobs that do not result in profits, a simple truth must be recognized - the private sector provides jobs as a result of the opportunity for profits, if there is no profit motive then there is no reason to provide jobs.  The resulting increase in costs based on the wage structure will end up reducing jobs to reduce hours and as businesses shut down, along with increasing prices.  Overall, it can be concluded that the goal of taking more money home has not been realized.

 

SOLVING THE PROBLEM

With one potential failure pending, the question must be asked if there is a better solution to the problem and complete the goal.  The answer always lies in solving the underlying problem instead of just putting a quick fix in the make-up.  In this case, the problem of minimum wage workers is skill levels that allows these workers to earn higher wages based on quality of labor as compared to wages based on a false legal directive that will likely result in less take home pay and higher prices.

Every employee, not just those at minimum wage, need to be offered training that can advance their skill level and earning power.  While it would be simple to limit the offering to those at minimum wage, the option needs to be offered to every employee that has the desire and willingness to increase their skill levels, this solution provides a long-term option to enhance the entire work force. the real question is one of the maximum utilization of the training instead of wasting efforts and resources on those employees that have no desire to move forward.  While it sounds cold, if an employee has no desire to improve themselves then they should not be allowed to bring down the rest of the employees through a legal imperative which will likely not have the desired long-term results.

The training solution means selecting a group of people that are willing to be trained, willing to make an effort and be placed in a new position where they will earn more compensation.  Of course, this is the end result of the process.  The entire process would be an initial interview in which each trainee is given a clear of understanding of what will be happening and what is expected of them and, this is the hard part, anyone that fails to live up to the agreement in the trainee will be rejected from the program until the entire list of potential candidates is cleared, projecting a 40%-60% rejection rate.  These people may be willing to make more of an effort if they can see other people succeed in the program.  

After a candidate completes the interview, the candidate goes through an aptitude test with a goal of finding the best profession for the candidate in the long term.  Once the aptitude has been determined then the candidate begins a customized training program where they come to the site and work through computerized programs.  If they fail to make the effort then they are rejected.  The positive part of the program would be the payment of minimum wage while in training so that the income continues through the program.  The goal is to take people that do not have skills to earn more compensation and provide the training for those skills, meanwhile, those people that do not make an effort or are unwilling to invest in themselves will be allowed to continue on their way, but they will recognize they are being left behind as a result of their choices.  

This approach solves the long term goal problem by increasing the take home income of the employee and, at the same time, increasing the value of the labor to the benefit of the employer and the economy, this is completely counter to the drain on the employer and economy of simply paying unskilled workers for nothing.

 

Minimum Wage Impact Compounds

The problem with minimum wage is that it is the base or starting point for all wages.  Every employee wage is based on a percentage over the minimum wage (even if it is not stated that way).  The problem that most people fail to grasp is the actual impact of forcing an increase in the minimum wage through the law.  While increasing the minimum wage will impact everyone that is being paid minimum wage but also consider the people that are earning between the new minimum wage and the current minimum wage, you can’t just increase the people at minimum wage without picking up everyone in between.

The problem is that the people that are earning more than minimum wage and have worked to get the extra, don’t want to be earning the same as the people that never got out of minimum wage, they want their earned increase over the new minimum wage.  What most people fail to understand is that wages are a ratings system for employees and while what each person earns is supposed to be confidential, if your are making more per hour than the minimum wage people, you know it and will be pissed if, based on an arbitrary law, you are back to the same level as someone that you know does not work as hard.  Either you want an increase or you will begin looking for another job that will pay you more than the minimum wage because you have already proven you are better and deserve it.

Whether we want to admit it or not, every employee is looking out for himself and compares himself and his work to others, especially when these other people don’t make the effort.  A forced law like this has one impact that people don’t think about, the law is basically saying to everyone that working harder is not worth it and we should all be worthless liberals that don’t make an effort but EXPECT to be paid more than they are worth.

 

Understanding Minimum Wage

Minimum wage has nothing to do with what an employee can earn, it is a compromise between paying nothing for worthless labor or having people not work at all.  Everyone should be a contributor to society and the economy but it is their choice.

Minimum wage is not just about the employee but also about the employer.  The employer needs specific functions performed and can either use a more productive employee or allow the more productive employee to keep working and pay someone else the minimum amount needed to get them to do this work.  The employer has one goal: stay in business and this is accomplished by generating revenue and controlling the costs of production to produce that revenue.  Every task needed for the production has a cost associated with it and it the employer wants to maintain the profit margin by keeping the cost of the task within the budget. 

The employer has one of two choices, keep prices the same and likely go out of business or increase prices to provide the needed margins for the labor.  Here is the funny part, if an employer has to increase prices to stay in business then it is likely that all businesses will be looking to increase prices to stay in business and if that happens then the increase will be negated by the raising prices.

The economic fact is simple: if you want to increase the wages earned by employees, then the employees must provide labor which has a higher value because this effect will not increase prices because the increase in cost is offset by an increase in the value of the labor.  When law forces the minimum wage to be increased then there is means to increase the value of the labor, it is a one sided change in the cost structure and should result in one of three results: 1) prices go up, 2) workers are terminated, or 3) employers relocate to locations which are more cost controllable.

 

Livable Wage

In truth, minimum wage has nothing to do with livable wages, never has.  Minimum wage has always been a compromise between the value of the labor provided by the employee and zero compensation.  One must remember that the original job structure was that of an apprentice and there was no wage, just a period of training to make the person capable of performing the required services for enough money to live and develop the skills to achieve the maximum compensation for services.  What most people fail to grasp is that if an employee is being paid minimum wage then they have not exhibited a clear understanding of their position within the organization and have not determined how to use their skills and experience to contribute to the overall success of the business.

The best possible example that can be given for this issue is when a person went into a fast food establishment to order a meal.  The person approached the counter and was asked, in poor grammar, what they wanted to order.  The person began to indicate the desired items but was subjected to a discussion of the low wages and how the employee had worked in the establishment for three years, all described in poor grammar.  Once the order was placed, the person paid and the change was wrong and required correction and, eventually, got the order but it was also incorrect.  The question that needs to be asked here is who failed - the employer for providing poor training or the employee for failing to grasp the basic concepts offered in the training?

In this example, we have an employee that is paid minimum wage because that is required, but the employee clearly was not providing labor to compensate the employer for the wages.  To start with, socialists and liberals fail to grasp that an employer is not obligated to provide a job to an employee, but once hired, he is often obligated to maintain the relationship no matter how poor the employee performs and this is due to the potential impact on the employer's unemployment insurance rates if the employee is terminated.  

 

Personal Responsibility

When an employee is hired, the employee has the responsibility to provide labor which benefits the employer by completing tasks that the employer has deemed warranted.  An employee at minimum wage is starting at the bottom and should look forward to the growth in the organization but some employees never seem to move from the bottom because their work is lacking and their personal responsibility is non-existent. 

As an economic environment, all employers are obligated to provide training to an employee to aid the employee in personal growth, some employers fail at this task and others excel but the true test is the employee.  If an employee makes an effort to learn, perform tasks properly and take on new functions then the employer will reward the employee with advancement.  If an employee fails to make the effort then the employer has a duty to the employee to terminate the employment so the employee can find a new direction and another employer that can recognize his untapped skills.  One of the obligations of government in this situation is not increasing the compensation for poor performance, but instead to identify the lacking employees and provide training and guidance.

This is one area where the government is lacking.  Many liberal governments push for increasing the minimum wages for the employee but there is no effort to increase the productivity of the employee through training and incentives.  As we have learned through the liberal programs in introductory school sports, a participation trophy is intended to increase the individual's self-esteem and provide the means to self-improvement.  In order to maximize the benefit of this concept, the law should be changed so that any employee still being paid minimum wage can be terminated without impact to the unemployment compensation statistics, or minimum wage employees terminated should not be eligible for unemployment insurance but will be pushed to the top of the que for assessment and training.  The part of the program that is missed is the simple truth that the problem may a worthless employee and additional compensation will not resolve poor productivity, it simply enforces the attitude of a poor employee that actual work is not required to receive a paycheck.

 

Minimum Wage Labor Value

Whenever someone talks about the minimum wage not being a living wage, the one point that they never bring up is the economic value of that labor.  In every situation, labor is purchased from the employee for the benefit of the employer to complete specific tasks that the employer deems most important.  The fact is that most minimum wage people, especially those employees that have been paid minimum wage for more than six months, do not perform work or provide labor that has a value greater than the offsetting compensation.  

In capitalism, everything is a trade, value for value except in the discussion of minimum wage where it is likely that the compensation paid for the labor is worth more than the labor provided.  This is due to several factors with the highest being a lack of experience and training to perform functions which are greater than clean up and, often, these employees offer no labor of any value because they spend their time watching and, hopefully, learning.  Every employer knows that the cost of replacing an employee is greater than the cost of keeping the employee at minimum wage.  An employee at this level is often only terminated when the mistakes become costly or the mistakes require an excessive effort to correct.

The worst part is that an employee should exit the public education system with certain capabilities and when those capabilities are not evident, the problem is not the employer but the education system.  Every new employee is expected to have specific capabilities: the ability to write, the ability to enter information into a keyboard, the ability to read accurately, basic math skills including the ability to count change.  Have you ever received five dimes and a nickel for $0.55 in change, the number of people that cannot count change is staggering!

As an employee, it is easy to see the number of unskilled people that are looking for work and that the employer needs a reason to keep a specific employee other than the fact that the employee is full of himself, very simply, your ego is not more important than the work on the job if the employer asks that it be done.

From a business perspective, it is easy to understand the difference between profit and loss. The fact is that a loss situation will cause all jobs to be eliminated as the business shuts down.  When the government steps in and changes the compensation structure for a business, it will likely cause the business to experience losses and encourage the owner to eliminate the least productive employees.  A simple fact is that the profit of the business is more important to the owner than the jobs or whether an employee can live off the low wages because the employee is unskilled.  An unskilled worker is a social problem not a business problem unless the government is compensating a business to provide training.

Before increasing the minimum wage structure, the only question the government should be asking is whether the labor provided has the value to the company to offset the cost.  If not, then the government is encouraging employers to eliminate minimum wage jobs, the very jobs that provide the entrance to the working world and the initial levels of training.  The best answer for all is that the liberals pushing for increases in the minimum wage should be provided funds to assess and train employees that have failed in the market.  In other words, the people claiming these employees are worth more need to prove that these employees can be proven to be productive. 

 

Minimum Wage Growth

The best outcome of a new employee at any organization is the quick increase above the minimum wage level due to the accomplishments of the employee.  This is valuable because it shows that the employee is interested in the long-term goal of growing in organizations and providing value for the compensation provided.  Every employer understands the cost of hiring another new employee and going through the same training process so, if possible, an employer would rather give someone an increase in compensation instead of losing the employee to a competitor and starting the training over again.

Most new employees fail in one major undertaking, they fail to work with the employer and get their input as to problems, suggestions and positive feedback.  The smartest growth pattern for a new employee is to do every job, asking the needed questions then do the work, do it well and be ready to do it again when needed.  Does the employee know why a task is needed?  As silly as it sounds, if something needs to be done and there is spare time, an employer notices when the employee is making a positive contribution as compared to standing around.

 

No Obligation to Provide Jobs

Anyone that talks for increasing the minimum wage for workers fails to grasp the basic underlying fact: No Employer Has An Obligation to Provide Jobs, they do so to make the organization run smoothly.  The problem that many employers have is the employee that refuses to follow direction, thinking that there is an easier way, a way that requires less work.  Most employers define the jobs that need to be done based on the needs of the business and these boring tasks need to be done, meanwhile, the employer has determined that these tasks need to be done in a specific way to make sure that the all parts of the task are completed.  Ever notice that these smarter, shortcut employees never ask WHY a task needs to be done in this manner?

The employer has a responsibility to the organization to generate the greatest profit levels based on the revenue generated while ensuring that the employees are provided for and satisfied.  This is a difficult compromise.  Some businesses provide perks while others may provide minor bonuses.  Both increase the level of satisfaction of the employee with the job.

However, the bottom line is that every employer would prefer not to deal with employees that make the tasks more difficult and there are some employees that want to work within the constraints provided by the employer.  The problem is always those people that think they have an entitlement to the job.

 

Social Responsibility

Every consideration of minimum wage should consider whether it is the responsibility of the business to provide compensation at a level higher than the labor has value.  If the labor value is lower than the cost of compensation, then society has failed to provide the needed training for these employees or society must take responsibility for those employees that have no increase in value over the long term.

Simply increasing minimum wage is never the answer because of the damage that will happen to the compensation structure for all employees over the short term.  In addition, increasing the minimum wage without providing additional training for those employees that cannot compete in the labor market simply increases cost to society without an offset in value generated.

One of the primary failings of the social structure is the lack of a training program.  If an employee receives consistent negative reviews from an employer, there should be programs for the employee to participate in that will aid in increasing the productivity of the employee.  These programs would offer the ability to determine if the problem is the employer training or the employee ability to learn.  Bottom line: if an employee fails to participate in the in training programs then the employee should not be offered any incentives because there is a need for effort on the part of the employee.

 

Minimum Wage Test

The only test for whether Minimum Wage should be increased is whether the value of labor provided by the employee exceeds the compensation.  If not, then the solution is not to give the worthless employee a gift, the solution is to train the employee to provide labor with a greater value, there by earning more.

If an employee CANNOT be trained to earn more then why should society be stuck paying for their failure. This is the issue with liberals - pay without regard to value. If you increase the minimum wage where the employer has no choice or input, then eliminate unemployment taxes for employers so they can fire anyone that fails to work to the level needed.

 

Minimum Wage Increase Impact

Don't forget, increasing the minimum wage requires an across the board increase for all employees because the minimum wage is the base and everything is a proportionate increase over the minimum so even the most expensive employee will get an increase.