Same old something for nothing. Let's just magically conjure up the extra dollars to pay everyone more and then all will be well. Hey, while we're at it, lets just make the minimum wage 40 dollars an hour. I mean, if the theory holds that increasing the minimum wage increases the amount of money people spend which feeds back into the economy, let's just pay everyone at McDonalds 75 dollars an hour. Then there will be a shitload of money feeding into the economy, right?!?
Say I own a lumbermill. My business model allows me to hire 10 employees at 7 dollars an hour, for 10 hours of work each per day. I pay them 700 dollars a day to make my lumber which I then sell.
If the minimum wage is increased to 10 dollars an hour, I don't just have a pile of cash lying around to give everyone a 40% raise. I have to do one or more of the following things.
1. Invest in expensive machinery to make my employees more productive to justify the higher salary I will be forced to pay them.
2. Invest in training/apprenticeship to teach my employees to be more productive, or just fire them all and find people with more experience/training.
3. Fire half my staff, the least productive among them.
The goal will be a smaller staff, maybe 6 people, using more sophisticated equipment to make my product. Even still, it will be at a significantly higher cost than before which will increase the price I have to my product at. After all, if it were better for my business this way with the higher productivity workers with better tools, I'd have done that on my own without force from the federal government, right? So four people lost their jobs, the national employment rate slipped a point or two, and that's not even the end of my problems.
So now since i have to sell my product at a higher price, the demand for my product will decrease. People will conserve and buy less lumber when it is more costly. So my business falters a bit. After a few months in the red, I am forced to fire another employee. My much larger and more efficient competitors suffer as well, but not as much as I. After a few more months, I default on my business, and now 10 (well, 11) jobs are gone.
gg minimum wage, wp
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