I keep hearing chatter about raising the minimum wage from $9.65 per hour to $15.00 per hour. That’s greater than a 55% increase!
Now, I do believe an increase in minimum wage is warranted, but maybe keeping pace with the rate of inflation makes a little more sense. Maybe a 2.5% to 4% increase in the minimum wage each year would be more sensible.
I remember more than 25 years ago when I was making $3.25 per hour and gas cost between 81 cents and 97 cents per gallon. I’m pretty sure we will never see those prices at the pump ever again. And, I’m not upset about the fact that gas prices are what they are. It’s all relative. As everyone makes more money, the cost of goods will increase relative to the increase in wages. Sure, there are other variables involved in that equation, but it’s to be expected. Payroll is usually the largest expense of any company, so increased wages have a tremendous impact on consumer costs.
If we increase wages by 55%, then we had better be prepared to accept all of the increased expenses that come along with those wages.
The person who drives the semi-truck hauling the fuel to the gas stations will need to make 55% more in wages, and the person working behind the counter will need to make 55% more in wages. Fuel, food, car maintenance, utilities, insurance, health care — everything will cost more because employers will need to pass those costs on to the consumer.
So, if someone has their wage increase from $9.65 per hour to $15.00 per hour, then a person currently making $15.00 per hour should be making 55% more — which is $23.25 per hour.
As everyone clicks their heals when they see larger paychecks deposited in their bank accounts, they need to keep in mind that everything they spend money on will increase in conjunction with their compensation.
The free market
We are at a pivotal point with the symbiotic relationship between our employment market and our economy. At this time, we have a perfect representation of how a free market dictates wages beyond any government requirements.
Many employers are struggling to hire and keep good people. There’s nobody sitting on the bench waiting for a job. Unemployment was at 2.3% in Fillmore County, Minn., as of May 2018. That’s a good sign for the economy, but bad news for employers. The most employable people are already working for somebody else, and employers have to offer prospects a lot more than what they are currently receiving in wages or benefits in order to steal them away from another employer. And, the reality is that it will be this way for another 10 to 15 years as the baby boomers settle into their new role as the heir apparent to controlling more than 75% of the assets of the nation.
With more jobs than there are people to fill them, wages will increase on their own. Employers will need to increase wages of existing staff so they don’t lose them, and they will have to offer higher pay to new hires compared to any other time in the history of their business. It’s a reality small businesses are facing everywhere, and especially here. I know, because I hear it all the time as I visit with our business community.
What about our seniors?
We have 71 million baby boomers retiring at a record pace over the next 10 to 15 years, and many of them will be living on a fixed income. Well, shouldn’t they receive a 55% increase in compensation in their social security payments to compensate for the inflation that will impact any products and services they need to purchase? If we don’t consider the impact on our seniors, they will suffer.
One thing that continuously makes me cringe with our government is the inability to forecast the consequences of decisions. Are you prepared to contend with the price inflation in products and services that will inevitably occur as a result of a 55% increase in minimum wage? Unfortunately, we cannot have our cake and eat it too.