Minimum Wage Increase Cross Post

This story is cross posted at Bring It On in the Red Diary. Bring It On and I have a love-hate relationship that started last spring. Some there really hate my opinion. Others have grown to understand me and embrace me. Bring It On has changed recently to become a small political chatter box where the left, the blue people, and the right, the red people, can shout it out, form an opinion and discuss the real issues at hand. Some people dislike politcal blogs, (s'up lawryde) and others love them. Personally my blog isn't intended to be political but about issues I face everyday. If you like discussion and love to argue a point, visit BIO and sign in. Special thanks again to the Bastard and pia. The Bastard even inadvertently linked me to the Daily Kos, getting me 300 or so hits so far.

Here's the minimum wage post (Kurt, I am gonna love your thoughts on this one!)

During the California state of the state address, Governor Schwarzenegger eluded to minimum wage increase. A political move? Absolutely! Straight out of Pat Brown playbook. What else is he going to do if he wants to win? State worker’s comp insurance is going down in California. A very big gift for the state’s small businesses who are safe workplaces. The effect of the minimum wage is minimal because I believe worker’s comp is off-setting it. The proposed increase over 2 years is $1 per hour. We already have a state mandated wage much higher than the national minimum wage at $6.75 instead of $5.75. No matter how you slice it though, we still are an expensive state to do business with. Real estate is insane, worker’s comp is still the nations highest and there are a lot of high wage technical jobs requiring high wage, talented people to do the job. It’s a crazy place…. anyhow back to minimum wage:

Personally, minimum wage to me sucks. It goes against supply and demand, anything you read and learn in an Economics class at the local college and is a deteriment to small business. It’s a mandate, it throws the system out of whack and it actually causes people to abuse the law, just to stay in business. I work for a large supply company and we sell one of the necessary products to aid mostly small businesses and some large corporations. Our product is an important source for both revenue and labor savings. Kind of a unique position, yes but it can become a problem. The companies I sell to are in the convenience business. They provide a service at a low cost that many of us cannot perform ourselves. It’s also a luxury versus a necessity. Many of us, use this business as much as once a week. Though a luxury the service is price sensitive and highly competitive. And if everyone in this country used this service, the enviroment would actually be cleaner! But price would scare us off if it got too high.

Things are stable in my line of work as of late. But now, the industry buzz is this pending minimum wage increase. Most of my customers are proud to say the either offer medical benefits or a wage a little bit over the current minimum wage. It’s a labor intensive business. You need quality people. Unfortunately, the market does not support a high wage or a wage a dollar an hour higher than our current minimum wage. It really is a starter job. A stepping stone. Not a life long career. Much better than unemployment.

So what does a minimum wage do to this industry I supply. Suppose they provide a service for $10. And labor rate and taxes, before they pay utilities or building costs is $4. So the net to pay other costs and to pay himself is $6. He pays the building costs, taxes and utilities and now he has $1 left for those services. As I said earlier the industry is price sensitive and can only command $10 for the service. The minimum wage goes up a buck and now costs him $5 instead of $4 for labor. He now has $5 to pay utilities, taxes, buliding costs and well, what’s left for the small businessman? $0.

This scenario happens everytime you raise minimum wage. Minimum wage increases hurt the local mom and pop grocery store on the corner, your dry cleaner, your local car wash or local sandwich shop. Big chains who are gobbling everyone up and over building like Walmart or Taco Bell can eat it. They got big bucks and low profit margins and no one notices when they raise their price. The little guy takes it in the shorts and simply goes out of business. This whole scenario all points to minimum wage and a cost of labor. What did the small businessman do wrong? He followed an economic model that didn’t make sense.

Now imagine what happens when you force Health Care costs on all businesses. That triple Venti Vanilla Latte will be 7 bucks instead of 4.20.