Biden Continues to Make Bad Choices

Minimum Wage is a Bad Idea

I almost didn’t watch the last presidential debate. The first one was more of a shouting match than a debate. It was a demonstration in bad manners for all who participated including the moderator. The debate was a on all channels, however, so I turned it on and read a book while waiting for something different. I was between pages in my book when the moderator asked about minimum wage. I heard Trump mumble incoherently then Biden came up loud and clear in favor of a fifteen dollar minimum wage. I have seldom heard him be loud and clear, so I listened to what he had to say. He said “Every wage should be a living wage.” It immediately became clear he had never owned a business nor had he studied economics. I realize a lot has happened since the debate. Joe Biden is now President, and is trying to add a $15 minimum wage to the new stimulus bill. The Republicans have answered with their own plan to dictate wages to business owners. Minimum wage is a bad idea. It fuels inflation, it ignores the power of the free market, and eliminates the concept of entry level jobs.

I got my first job off the farm when I was thirteen. I was hired by our small-town market as a bag boy for 75 cents per hour. I had several applications out and was offered 80 cents by the supermarket out on the highway, so, I switched jobs and worked for them until I went to college. It soon became apparent to my bosses that I liked working and was assigned additional tasks and more hours. Our store was a union shop. The contract specified that when I had accumulated 1040 hours, our store manager had the option to to let me go or put me on the union roles with a 50% pay raise. I made sure the store got its money’s worth. My senior year in high school I was the supervisor of the night crew in one of the largest Safeway stores in the country and worked weekends in our local store on the highway. A fifteen-dollar minimum wage would have denied me all of that. Bag boys were entry level jobs and gave good workers the opportunity to demonstrate their capabilities. At 75 or 80 cents an hour local markets could afford to hire me. As the minimum wage increased, entry level jobs were eliminated. Bag boys are gone. Entry level jobs provided the opportunity for our youth to learn valuable skills; to learn to get along in the workplace, to learn a work ethic, and to learn that there are rewards and consequences based on the quality of your work.

We used to stop at a restaurant midway on our trip to and from visiting our son. When Washington state raised the minimum wage a few years ago, the service suffered as they laid off waitresses, and within a few months they were forced to close their doors. Businesses must make a profit. When operated at a loss, they close down. Investors must get a return on their investment. If investors don’t get a positive return, they take their money elsewhere. This is true for large corporations as well as mom and pop shops. Boeing moved their headquarters out of Seattle because they could realize a bigger return on their investment elsewhere. Labor cost was a factor. Amazon is no longer expanding in Seattle. Employee compensation is a cost of doing business the same as raw materials and equipment. Often, it is the largest cost. When costs get too high to make a profit, they can cut employees or move to a location that is more business friendly. A few years ago, a tuna processing plant in American Samoa paid workers $3.00 per hour. The cost of living in Samoa was low, and everyone was happy. Then federal agents enforced the tuna canners to pay the federal minimum wage. Within a year the processing plants moved to the Philippines, the workers lost their jobs, and went on welfare. Everyone lost.

Some labor is more valuable than others. Is it fair to pay a worker who shows up on time every day the same as one who takes frequent time off? Is an experienced cook at McDonalds worth the same as the high school kid who wipes off the tables? When unskilled, entry level employees have their pay raised beyond market value, expereienced employees rightfully demand more money. Employers find their cost of labor rising and pass the increase along to their customers. Minimum wage fuels inflation and everybody loses.

Minimum wage set at living wage levels sounds wonderful; but in practice, very few workers benefit. Minimum wage laws play havoc with the free market, eliminate many entry-level jobs, and fuel inflation. They are a bad idea.