Seniority and Skills Not Worth Anything; Unhappiness Spreads With Minimum Wage Hikes | MishTalk
. . . but Mish is correct the beatings will continue until morale improves.
Read more after the break!
"Those on the job for a few years complain to deaf ears that they deserve more than new hires who don’t know the ropes.
Some think this is an unforeseen consequence. I see at as a planned consequence.
The Wall Street Journal reports Push for $15 Raises Pay—and Tensions.
"The growing push to raise the minimum wage to as much as $15 an hour is creating new issues in the workplace: While some of America’s lowest-paid workers will get fatter paychecks, their veteran colleagues may feel underpaid.'"
This is an issue I will likely return to again and again. For individuals earning below the minimum wage, these new laws will simply increase their pay up to the new minimum wage amount, if the can keep their job. For those earning a small amount more than the new minimum wage, perhaps $1-3 per hour, they will also see some, albeit small increase in hourly wage. This is because these people will not willing accept more tasks and duties for the same pay as minimum wage. There is a significant value to these people to make more than minimum. Remember these are people now making $15-18 per hour or well more than double the minimum wage.
After the new minimum they may make $16-20 per hour, but nowhere near double the new $15 per hour minimum wage. This will be frustrating, and cause much unhappiness. But they will get a boost in pay.
On the other hand, most businesses which rely on a significant number of minimum wage workers, retail, fast food, etcetera will not be able to raise the wage of these workers without raising the price of products sold.
"Among those opposing the wage hike is Ed Rensi, the former president and CEO of McDonalds. He wrote about the effect that a $15 minimum wage would have on his old company in Forbes on Monday, suggesting that:
…a $15 minimum wage won’t spell the end of the brand. However it will mean wiping out thousands of entry-level opportunities for people without many other options.
He explained why:
The $15 minimum wage demand, which translates to $30,000 a year for a full-time employee, is built upon a fundamental misunderstanding of a restaurant business such as McDonald’s”
In truth, nearly 90% of McDonald’s locations are independently-owned by franchisees who aren’t making “millions” in profit. Rather, they keep roughly six cents of each sales dollar after paying for food, staff costs, rent and other expenses.
Then he does the math, which will leave entry level workers in a bad spot:
“A typical franchisee sells about $2.6 million worth of burgers, fries, shakes and Happy Meals each year, leaving them with $156,000 in profit. If that franchisee has 15 part-time employees on staff earning minimum wage, a $15 hourly pay requirement eats up three-quarters of their profitability. (In reality, the costs will be much higher, as the company will have to fund raises further up the pay scale.) For some locations, a $15 minimum wage wipes out their entire profit.'"
Former McDonald's CEO Drops Hard Truths on What $15 Minimum Wage Does to People Who Need Work
The price of the product will have to rise. No business can pay only its labor force and not repay it capital contributors for the use of capital. Profits are not just a good idea, they are ultimately mandatory.
The people now making a new higher minimum wage will be somewhat protected from this price rise in myriad products by the fact that they are being paid a much higher wage. The people in the near new minimum wage area will also be somewhat protected by the fact that they will also have an increase in their wage, however this will be smaller, and may not even repay them for the increases in prices.
The upper middle class, and wealthy will also be protected by the fact that they are sufficiently wealthy to be insulated from these price increases.
The lower middle class, and the working class, however will not receive addition wages, but will be hit by significantly higher prices on many things. These groups will see their standard of living drop.
This is essentially a hidden tax on everyone to pay a wealth transfer to a specific group. The groups most injured by this are the lower middle class, and the working class. They will be paying a new tax, a regressive tax, which they cannot afford as a wealth transfer to those receiving a wage increase under the new minimum wage.
As Mish notes, there will be unhappiness with the new minimum wage, there will also be politician induced reduction in the standard of living among the lower middle, and working classes. So much for the idea that progressives are looking out for these two groups.