How Forcing Companies To Pay $15/hr. Hurts The Poor

September 18, 2018

A Living Wage is a fallacy, a falsehood and can never help the poor. In fact, it harms them.

I took law courses, unlike my opponent, and he doesn't understand product development and how manufacturers function. He inherited a business. He has demonstrated ZERO experience and little knowledge of economics per the proposals he has put forward. Allow me to explain:

When you work for a company, say you are paid $12 to bake bread loaves. You want a raise to $15. The owner says they cannot afford it. Remember, your needs and desires are balanced against the entire company's balance sheet, every other employee, and every competitor they have in the marketplace. 

When the government steps in, as they have in Venezuela, and says you must raise salaries, companies must comply. In Venezuela 40% of all business closed overnight when salary hikes were enforced. Unemployment skyrocketed. The country is in such a desperate state that open rebellion is occurring. People are dying from socialist policies.

Here is what would happen in the North Carolina if we enact a "living wage":

1. Companies would have to look at the costs of their products. They still have the same costs for materials, transportation, etc. They might be able to cut their marketing budget, or slotting fees to grocery stores, but that would mean less awareness and possibly fewer sales which would translate to layoffs. Companies need stability to be able to predict their production quantities and project sales. Throwing a wage hike into their planning destroys it entirely. It causes chaos. Artificial rises in labor costs destroy firms.

2. Companies have a choice to make. They can lower the quality of their product, raise the wholesale pricing, or reduce labor costs in other ways. Say there are five employees in your department each earning $12 per hour. The company must now pay $15 per hour. That means one person loses their job in order to balance costs. The company spends the same amount only someone is now unemployed. This must happen. Further, there would be no overtime, and others would have hours cut to make up the balance of the hourly loss. 

For those who argue I am wrong, please look at Portland and other cities where this has been attempted. The good intentions of a living wage translated almost immediately into multi-generational business closing their doors forever. Companies laid off workers, reduced hours and made other adjustments to stay open. The poor were hurt, and worse, now there are fewer shops to buy groceries and basics. People who had entry level positions are on the street unemployed, and the final blow is that even with a lower wage again those jobs will not come back. Companies like fast food chains are installing kiosks there to take orders, and other firms are following suit. Unskilled and low-skilled laborers lost enormously. I think the average North Carolinian would rather have a job that pays $12 per hour, and find some side work to increase their income, than lose their job entirely.

3. If companies don't adjust labor costs, they must raise prices. This means they cannot compete as well with any foreign products. While this might not affect bread, think about everything North Carolina produces that could be affected. That means consumers will have to choose between higher priced domestic goods and cheaper out-of-state products or even foreign goods which have no forced minimum wage. So the company raises their price and sees sales drop. This creates a cycle of further retrenchment. More layoffs. Less people buy the products made here. 

We have all seen this happen before. When taxes, stability, price or wage controls are forced to increase, companies react by reducing product lines, reducing labor forces, or, if possible, leaving the state, or nation. If you remember the 1970s malaise, high interest rates, low employment, huge layoffs, entire cities bankrupted, then you recall what we've lived through before with wage and price controls, and minimum wage hikes. It doesn't work.

4. So how does this hurt the poor? So a few people get laid off. So what? One, it is not a few people. A 35% pay increase means a 35% adjustment in labor costs, reduced benefits, elimination of health insurance, no vision, no dental, less of everything a company can pay its workers. In the case of employees who are paid $10 per hour it is worse. A 50% pay increase means 50% must get laid off. A wage hike means massive layoffs. To those still employed they do not even have a living wage. Remember, every company will be affected. Every product will go up in price or labor forces will be cut. What there is to buy will become more expensive as labor forces shrink. Fewer sales means layoffs in management, in other departments. High salary positions will also disappear. Manufacturing and lucrative jobs will again LEAVE THE STATE for states that have no forced wages.

Here's the worst part. People receiving benefits, welfare, and food stamps are faced with higher prices on many products. They were not working. They received no living wage increase. Their dollar buying power is LESS. Poor people get hurt, and young people will find no work. Elderly on fixed incomes suffer even more. There will literally be over 90% unemployment in the youth sector because all entry level positions will have been phased out. Companies paying $15 per hour must justify the hourly wage by increased production and value from employees. Sixteen to twenty-one year-old workers that are not critical to operations will not find jobs. At all.

5. The consumer cycle of our economy will fail. This has been tried in other countries and it has had the same result. Business collapses. 

If you want to earn more we need to drive business forward and increase growth. As more millions of jobs are created there is a natural competition for workers. We are seeing private companies start to raise wages now because good workers are becoming scarcer. This process will continue unabated right now. In the US there are over six million unfilled positions. Many need trade or other training. Over the past three years of the Trump administration average wages have risen 3% per year. Millions of new jobs have been created, and more are coming. We have the best economy on the planet. WHY would anyone want to trash it?

IF YOU DO NOT BELIEVE WHAT IS WRITTEN HERE, please go ask the former small business owners of Portland who closed their doors because of "living wage" hikes. Ask the McDonald's and other large companies who are rapidly replacing counter workers with touch screen kiosks. We all see and use them now. Do you know why? They are cheaper than paying $15 an hour to unskilled and low-skilled workers. They never show up late, or sick, don't talk back, and keep working without discipline or incentive.

The best advice to those who want to earn more is find out what jobs in your area are going unfilled and target them. Get to community college or trade school and learn what you need to start working semi-skilled, and skilled positions that exist currently. Don't expect government to artificially raise your wages. It doesn't work, and it only hurts the most vulnerable. And in the process creates more poor people who have no jobs.

It was bad enough when we saw bread rise in price from a dollar a loaf to $2.40 and $3.00. If government dictates a $15 per hour wage get ready for a bread loaf costing $6. Anyone for a $10 Big Mac? Or a dozen eggs for $7? How about interest rates that go through the roof? I don't want that. I lived through 24% creative financing to try to get a first home. If you think it is terrible that a small percent of people earn a minimum wage, then help them directly. Don't destroy the entire economy.

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