I recently had a rather lively discussion with a family member regarding minimum wage. She was arguing that the minimum wage law in Washington State was a good thing, I was arguing quite the opposite. As I get rather lively while arguing anything regarding laws that I think are ridiculous, I'm happy that my family members are a little more in control than I am, and she simply backed down from the argument saying 'we're obviously not going to agree', and we dropped it.
That gave me the idea to write a brief article explaining exactly why the law in Washington State is stupid. Feel free to send in whatever comments you want supporting either my opinion, or your own opinion on this, but if you think I'm wrong, I can explain to you in no uncertain terms why I'm not.
The law in Washington State, adopted by a vote of the people 1998 (Initiative 688), requires L&I to make a cost-of-living adjustment to the minimum wage each year based on the federal Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). What this means, in normal language, is that every year in October, the Washington State Department of Labor and Industries figures out what the inflation for the year was, multiplies that by a really long number, and figures out how much to increase the minimum wage.
The initiative was passed into law by a vote in 1998, and became effective January 1st, 1999. The law initially raised minimum wage from $5.15 an hour to $5.70 an hour in 1999, $6.50 in 2000, and then started the calculations based on inflation for every year thereafter. Since the law was passed, 2010 was the only year that the wage did not increase, owing to the fact that the inflation rate actually decreased. For 2011, the wage is set to increase, once again, to $8.67 per hour. While you may look at this and see 'only' a $0.12 per hour increase, lets do the math for a small business owner.
Lets say that you own a small sporting goods store. You employ 15 people, not counting yourself, and you act as manager for your store. Of those 15 people, you can safely assume that 10 of them are making minimum wage. We'll further assume that those 10 people all work about 20 hours per week. This is not at all an unlikely scenario, although most businesses would have more than 15 people running the place.
A $0.12 per hour increase, times 20 hours makes $2.40 per week. Multiply that by 10 people, you're looking at $24.00 per week. Now, multiply that times 52 weeks per year and you have a net loss of $1248 per year. So this business owner, through no fault of his own, has lost $1248 a year from either his income or his business operating budget for the year, depending on how he has things set up.
Whoopy, $1248. Not a lot, right. Ok, so if your employer comes up to you and says that they're cutting your wage by $100 a month, what are you going to have to say about it?
Let's take it a step further. What if minimum wage went up $0.48 (like it did from 2008 to 2009)? Well, that same scenario above would have lost the small business owner $4992 a year, or $416 a month. How many of you want to lose $416 a month from your income?
It keeps going from there. How about when the owner is barely scratching by, and just can't take that loss to his income. Well, there's one sure way to make that money up. If you lose $4992 a year based on something you can't control, and you have 500 sales a month that average $50 per sale, you can make up the difference by increasing your costs. Just add another $1 per sale, and that will cover it. So now the owner is forced to spend time going through his inventory and determining which items he can increase the price of without making too many customers angry, and without affecting his overall customer base. So now costs go up.
How is inflation calculated? It's based on costs. If costs go up because of a law, that causes inflation. If inflation goes up, then next year when L&I calculates the minimum wage, it's going to go up. This, in turn, causes small business owners to have to increase their prices, or close their doors, which in turn causes yet more inflation. Are we seeing the pattern here yet?
This example was based on one small business, with one owner who operates as the manger of the store. Several years ago, I managed a restaurant, and the owner of this restaurant owned two others in addition to the one I managed. The one I managed lost him about $32,000 a year. The other two combined gave him a net income of about $25,000 per year. When calculating the minimum wage increase one year, I found that it was going to cost him $34,000 to pay the increases, and this was assuming that we didn't increase the wages for the people who were making more than minimum wage at that time. So that would have reduced his net income to -$9,000 per year. Hmmm..... Seems to be a problem. Once again, prices were raised to compensate for this discrepancy. Of course, we couldn't raise prices enough to take up all the slack without alienating a lot of customers, so he ended up losing money in the long run, once again.
Yet, the most frequent arguments I hear FOR this ridiculous law is 'people can't live on that'. I'm going on the record, and my official campaign will be based on this. Duh. That's the only response I can possibly make to such a over exaggerated, simplistic view point. Minimum wage was NEVER intended to be a 'living wage' for your average US worker. Minimum wage was established to prevent employers from taking unfair advantage of industrial workers in 'sweat shops', which were mostly staffed by women and children who, at that time in history, had no real power in the world at all. People were being worked for 18 hours a day, and paid little to nothing. Some of these places had cots where people would sleep between shifts, and some people lived there full time because they could afford nothing better. It was the equivalent of indentured servitude, and was a very harsh way of barely surviving. Minimum wage and labor laws, specifically child labor laws, were passed to prevent this atrocity from continuing. Slowly over the years, the focus has shifted to the point where people believe that it should be a wage that a person can support their family on. This notion is patently ridiculous, and just not possible. How in the world can you require employers to pay such a wage, for what is an unskilled profession (face it, if it was skilled labor, or something requiring specialized knowledge, they would be making much more than minimum wage)? Who would then be making MORE than minimum wage, and thus be able to afford the products of the businesses that are paying minimum wage? The is no way, economically, this could support itself.
Minimum wage is a STARTING WAGE for people just entering the work force, with little or no specialized skill, training, or knowledge. Anyone who is a hard working, contributing member of society, will be able to earn more than minimum wage simply by showing their bosses that their output is of higher quality, or they are more productive, or have the ability to do more than the other people working there. However, if you're working for a minimum wage job in Washington State, it's difficult to every advance, because every year that industry is hit with a cost increase that they must somehow attempt to absorb and continue to be in business.
The people who work their entire careers, going from one minimum wage job to another, never getting much more than that, never making it further ahead in live, are the people that the voters in Washington said needed a little extra 'help' by increasing the Minimum Wage. They are also not helped one bit by the wage increases, that are constantly offset by price increases every year. They WOULD be helped by specialized training, or education of some sort that made them more productive, and allowed them to contribute more to a business, thus being more competitive in the market place, and being able to earn a higher wage. Most people have the ability to help themselves, if they'd just look for ways to do so, and they choose not too. Very few people have no ability to help themselves, and those people are the ones that we should offer assistance too. The people that choose not to try, even though they have the ability to do so, have absolutely no right to complain about their 'lot in life'. If you're unhappy with your life, try to do something to change it. Learn something new. Seek advice from somewhere. Ask friends, family members, or even total strangers for ideas.
Here's a novel concept. Take responsibility for your own position in life, and do something about it.
What about for teens starting out? They don't have the skills and some of them have bills. Seeings how I was one. If pay was to be cut, that would put them further it the hole. I understand, it's bad for the businesses but try having bills at the age of 16 and trying so hard to help keep your family on top of bills.
ReplyDelete$8.67 today, $5.15 in 1997. What do you think has more buying power?
ReplyDeleteBeyond that, even a 16 year old would get merit increases, if they were capable of doing their jobs as trained, which gave them more buying power. Making $7 an hour in 1997 would be more than double the buying power of $8.67 today, and that is partially because of these increases. No, it is not bad for businesses, it is bad for EVERYONE. The businesses employ fewer people, because they are forced to try to keep their costs down. Unemployment rises. The businesses sell their items for more. Costs rise. Now you have higher unemployment, higher cost of living, less purchasing power......
So, how is that helping a 16 year old pay their bills? When I was 16 I had 2 jobs, 1 full time and 1 part time. I was making $4.90 an hour. That paid a house payment, electricity, phone bill, gas, and insurance. I DARE you to try to do that anywhere in this state, with minimum wage nearly double what I was earning. Won't happen.
As a business owner I feel the sting of these auto increases. I have always paid more than the minimum after said employees goes through a training.a good incentive to perform. But now why should they work?The raises are coming no matter what they do.So I will not keep anyone who doesn't earn their keep. Also lets talk about internet sales. how do they contrbute to the tax base and wages?
ReplyDeleteI totally agree with this statement. The other alternative is to eliminate jobs until you have no one left to eliminate and then close down. This is happening all over Washington. How do we repeal this minimum wage increase, initiative 688? I will help anyone who is willing to do this. Lets keep Washington small businesses open and put people back to work. I am a small business owner and approve this message. Melodie Tyree
ReplyDeleteTheir are two ways to repeal this law. First, the legislature can introduce a bill to do so. There's no way that would happen, mostly because the Dem party is in control, and a big part of the Dem's, voters and candidates, would be very much against this. It would be political suicide for any who voted for it. It would be slightly less suicidal (not much) for any Republicans that voted for it.
ReplyDeleteThe other way is to get an initiative, gather the signatures to get it on the ballot, and let the voters have their say. Odds are you wouldn't even get it on the ballot.
I think what we need is a temporary "freeze" on the minimum wage (which could likely be pulled off now with the economy in the crapper and not be too tragic to the legislators that voted for it) coupled with modification of the existing law to allow for minimum wage increases at a lower percentage, less frequently, or perhaps both. Once every 5 years wouldn't be horrible. Still stupid to have it coded in to happen on a regularly scheduled basis, but much less damaging to our state than every year would be.
It will NOT happen in the legislature. It's possible that we could get an initiative going to modify the law, however, that would be a hard fight as well, and would need to be very carefully worded and modified to not alienate too large a portion of voters who think this ridiculous law is great.