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One Moment, Please... Gambling with Minimum Wage


Fri, Mar 7th, 2014
Posted in All Commentary

There’s a lot of talk about increasing the minimum wage, both at state and federal levels. For Minnesota, the conversation has been leaning toward an increase in minimum wage from $7.25 per hour to $9.50 per hour -- a 31 percent increase.

At the federal level, our current administration has pushed the agenda of increasing the federal minimum wage from $7.25 per hour to $10.10 per hour -- a 39 percent increase.

As I see it, there are several problems with this entire concept.

Privilege or Entitlement?

Employment is a privilege, not an entitlement.

Nobody is holding a gun to anyone’s head and making them work wherever they are currently employed. Minnesota is an at-will employment state, which means that employees can quit their job without notice and employers can terminate employment without notice for any reason or no reason at all.

So, to me, if you are gainfully employed, you should appreciate what you have. If you are employed at a company where you feel you are not appreciated or underpaid, then get up off your butt and start looking for another job. The most employable candidates for jobs are usually the ones who are already employed with another company.

But, as I talk about privilege versus entitlement, I also feel that it is mutually beneficial for companies to hire and retain the best people in the marketplace.

When you have great talent, you need to pay them as much as you can afford to pay them within the financial means of the company’s sustainability.

I also believe that someone who has a great attitude, outstanding skill sets, and demonstrates that they are a team player deserves an above average increase in wages on a regular basis. Meanwhile, someone who has a negative attitude or lacks talent or doesn’t play well with others in the workplace deserves no increase in pay.

Companies, and especially small businesses, can’t afford to keep people on their teams who don’t perform at an acceptable level. In sports, it’s been said many times that we are only as good as our weakest link. For companies, the same analogy applies when it relates to employees.

Furthermore, I believe that jobs that don’t pay as much as we feel our talents are worth should encourage us to better ourselves elsewhere. I had a lot of jobs in my early years that were humbling experiences, and they paid minimum wage. I recall earning $3.25 per hour doing jobs I knew I didn’t want to do for the rest of my life. Those jobs became motivation.

So, basically, if you don’t like how much money you are making, then seek to change your circumstances. It’s all on you.

Artificial Inflation

If everyone making $7.25 per hour gets a $2.85 per hour raise to increase their wage to $10.10 per hour, then shouldn’t everyone else who makes more than them also get a comparable wage increase?

For example, if someone has been with a company for five years and they started out making $8 per hour, working their way up to $11 per hour, isn’t it a slap in the face to the long-time employee if a new employee starts out making $10.10 per hour?

Basically, with a 39 percent increase in the federal minimum wage, we have just devalued every other employee’s earnings who makes more than minimum wage. They deserve more money, too, but where is this money going to come from? The consumers? The government? The taxpayers?

And, with that dramatic $2.85 per hour increase in minimum wage, all businesses will adjust accordingly. Grocery stores, gas stations and any other business that has to pay more to their employees will not also automatically see a corresponding increase in their revenues.

If anything, we will see an increase in the cost of all consumables, so this dramatic minimum wage increase will impact the Middle Class when they pay for goods at the cash register. Businesses, and especially small businesses, will adjust to make their business competitive yet sustainable.

And, the ability to be competitive with price-sensitive consumers is a real issue. Just because the federal minimum wage is increased, doesn’t mean that businesses starting making more money. Instead, they have to find a way to cover that additional payroll freight.

What I think our current administration fails to understand is that this will drive artificial inflation at the cost of small businesses and the Middle Class.

If higher paid employees want more money in conjunction with this $2.85 per hour minimum wage increase, that’s fine. But, that means there will have to be jobs cut in their company, and existing employees will have to take on more of the workload. Most business owners will tell you that their greatest expense is payroll, so messing with payroll will have a tremendous impact on the big picture of any small business.

The other element of this conversation that I think gets overlooked on a regular basis relates to the owners of these small businesses. There are roughly 1,100 businesses in Fillmore County, and all of those business owners are beholden to taking care of everyone else before themselves and their families. They take their income and cover the cost of payroll, inventory, facilities, utilities, equipment, insurance, taxes and whatever else comes along. And, then, after everyone else is paid, whatever is left over is what they receive. In most cases, the majority of these small business owners are not overseeing any sort of get-rich-quick scheme. They work hard, endure struggles, and hope it will all pay off some day. And, with that said, think of how many empty store fronts we have in each city in Fillmore County. So, obviously, running a business isn’t easy.

From my conversations with many local business owners, increasing the minimum wage at the proposed levels will result in job cuts. If you get a chance, ask any local business owner who employs more than five full-time workers how increasing the federal minimum wage by $2.85 per hour will impact their business. I think it is always best to hear it straight from the horses mouth.

A “Just Because” Compromise

While I don’t believe that people deserve a pay increase “just because,” I do believe there needs to be a minimum wage standard.

Maybe we need to have our minimum wage increased at the average rate of inflation every year, and set it like clockwork so we can move on from this debate to solve other challenges like our national debt. If the federal minimum wage increased by a small but manageable rate each year, then maybe businesses could budget for that increase.

But, I have to say I am torn by this idea, as well, because I don’t believe that people deserve a pay increase “just because.” That socialistic, union-driven mentality of everyone-gets-an-increase is what encourages mediocrity and complacency in our nation’s workers.

Or, maybe, just maybe, our nation is giving up on the idea of encouraging employees of companies to earn an increase in their wage by coming to work with a great attitude, being a team player, and continuously finding ways to help their company succeed -- for everyone’s sustainability and prosperity.

If we are going to raise minimum wage to $10.10 per hour, then why don’t we just raise minimum wage to $20 per hour so everyone is happy (insert sarcasm here)?

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