The misconception of a minimum wage increase

The misconception of a minimum wage increase

Minimum wage increases don't usually have the desired impact for most low-wage earners.

Chicago’s O’Hare airport is about to get hit with an employee strike, as workers are demanding an increase in the area’s minimum wage to $15 an hour, and according to some sources, workers at McDonald’s restaurants and graduate teachers across America plan to join in as well.

I don’t understand why $15 is the magic number.  Why not $20 per hour or $50, since we only need to pass a law to make it happen?

It comes from the liberal notion that all we need to do is give everybody more money and take it away from the rich capitalists, in short income re-distribution.  Sounds great, like having free apple pie, but someone has to buy the apples, whether it be the rich capitalists, or the American taxpayer.

Insert government in the place of rich capitalists in the statement above and you have the same thing with regard to public employees.  There is the notion that that there is a pot of gold at the end of the rainbow and all the government has to do is grab a handful and pass it along.

In the real world, the $15 per hour minimum wage has to be reconciled with the current business model, whether private industry or government agency.  That means the additional $12,000+ expense to the company per employee per year, required to bring their working wage from $9 to $15, must be absorbed somewhere.  Not to mention additional expenses and other taxes paid on behalf of the employees.

Business owners have two options, raise the cost of their goods or services to their customers, or reduce the cost of providing their goods or services.  Either of these options hurts the low-wage earners in the area by costing them more to purchase the goods or services from the businesses, or by losing their jobs in cost-reduction measures taken by the firms.  If a double cheeseburger cost $2.99 now, it will soon need to sell for $4.19 after the raise, based on equal percentage increases.

The net effect is the low-wage earners are in the same position as before, with little disposable income.  They are bringing home more money in their paychecks, if they still have one, but the cost of living has risen to take away their extra cash.

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