Minimum Wage.
What is it? Will it ever be enough? If $7.40 is now enough why not $20, or even $40?
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OK try an experiment… Take a strip of cardboard 6 feet long. This will represent your spending power and a wage you are earning from your employer, who for the sake of this argument is the ONLY business in existence.
Spending power = 6
Now, establish a minimum wage of say… 7 WHOO HOO!! You are now earning 7!! You have taped a 1 foot extension to the cardboard and are king of the world!!
Spending power now = 7
But wait.. Your employer just has a foot cut off his cardboard strip… to give you yours.. So, the logical thing to do is to add a foot to his bottom line by raising prices! CHA CHING!
Did I mention he is the only game in town? Thats right, you buy from your employer as well. So your buying power today at 7 feet of cardboard is in reality the same as 6 feet of cardboard prior to your wage increase. Ow.. oh well guess you were getting by back then so it’s ok..
OK Spending power back to original = 6
umm huh? Whats that? What do you mean taxes?
Oh yeah, your additional income by the way is nearly all taxable because that additional amount is over the deductible amounts the government allows. Yep you get to pay FULL taxes on that new money …YAY! Oh and did I forget to mention your employer (who happens to be your store as well) had to raise prices again? It seems somehow they have to pay a high margin to the state as well, as your increase in sales tax. Oh yeah they also pay the other half of your social security.. 4.3% + 6% (oh my the numbers are soooo confusing!) +7.5% equals the business expenses of 17.8% on your windfall of minimum wage!
So in reality, instead of your 6 feet of cardboard purchasing power with your 7 feet income you now have only 5.822 feet of purchase power.. DOH!
Well… there is ONLY ONE THING TO DO… …dammit.
Price controls!! Get that cardboard back under control! Damn the torpedoes!! NO WAY will that filthy rich business owner get the jump on you!!! You have the power of the vote (and a good union to back you up) and populism wins!! YAY!! Low prices MANDATED.. nya nya nya nan na na…. take that!
What? …oops. Just lost your job dues to downsizing. it seems your employer had way too high expenses. Wow.. didnt see that.. huh?
——————— COMMENTARY ———————
EXTREME?
No. Even though the exercise assumes a single employer, and is quite simplified, it demonstrates the reality of minimum wage policy and it’s REAL effects. Goverment career politico types really couldnt care less as long as THEY get their paychecks. They will claim sympathy for the poorer among us, and pretend to empower those folk by assuming dominion ( inappropriately) over business both large and small.
Individuals have ownership of their abilities and ALSO have the ability to negotiate with business for compensation which is in line with their actual worth. Government is unnecessary, and in fact gets in the way of success, both for the individual and business entities, and usually interference begets further interference and complications down the road.
I cried FOUL when the minimum wage which recently jumped to $7.40 in Michigan was proposed. Granholm claimed at the time that it would “energize business,” or some such crap. She is TRULY a classless piece of work, and her actions are merely guided by her union support system. THEY HAVE contracts that are based on minimum wages, and the increase means a raise for union employees.
Will we ever have enough economically competent legislators to straighten out the state of Michigan? Maybe this year we have a chance. If not, then another several years of economic misery for Michigan are in store.