Open Letter to a Business Owner Who Supports Raising the Minimum Wage
Washington, DC
Dear Ms. Schaefer:
You’re identified in a mass e-mail, sent by “Business for a Fair Minimum Wage,” as “co-owner of nine ACE Hardware stores in Washington DC and Maryland.” And you also signed a petition calling for a higher minimum wage – a stance that you justify with the following argument:
“We have nearly 200 employees and our starting wage for sales associates is $10 an hour. That helps us attract and retain employees who deliver the great service that draws large numbers of customers to our stores and enables us to stay competitive. Increasing the minimum wage will help promote a healthy, dedicated workforce and keep more dollars circulating in our local economy.”
Your statement raises many questions. For example: if all employers would be better able to “stay competitive” by paying all of their workers wages above the current minimum, why do they not already do so? After all, you now pay such higher wages. Why do you suppose that your particular business plan will work equally well for other firms? Asked differently, why do you presume that other business owners are so inept that they’re leaving easy money on the table?
If history is any guide, you – a business owner who supports a higher minimum wage – actually presume no such ineptness on the part of your competitors. Your support for raising the minimum wage is almost surely driven by your wish to increase your profitability by throttling your competitors. Quite likely, your rivals now profitably use business plans that rely more heavily than does your plan upon the use of low-skilled workers. Because your workers already earn wages at or above the proposed higher minimum, your costs will be unaffected by a hike in the minimum wage. Your competitors, however, won’t be so lucky. When their costs are forcibly raised, they’ll be less able to compete effectively with you for customers. Some rivals will exit the industry while others scale down their operations.
Your enhanced profitability, in other words, will be extracted from the hides not only of your hapless competitors but also from the many low-skilled workers whose employment prospects will shrink – and all while you wear a cloak of faux altruism that, sadly, fools the gullible into thinking that you’re a friend of the poor.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
http://cafehayek.com/2014/01/open-letter-to-a-business-owner-who-supports-raising-the-minimum-wage.html
one word my friend GREED. Everyone could pay more they choose not to. That is exactly why we need to regulate minimum wage. Workers would get as little as possible if it were totally left up to employers. Some employers just naturally do the right thing and pay a livable wage. Others not so much. If a raise in the wage hurts my competitor because they are cheap so be it. Higher wages do retain better help. Most unskilled workers can be trained to do a job that they are capable of. But the same who won't pay won't take a low skilled person and teach them what they need to know. They won't take the time nor do they want to bear the expense.
ReplyDeleteLet's just say Rick that you're planning to build a room on your home.
DeleteLet's just say you seek and obtain the normal amount of bids to do the work.
Let's just say your highest bid by a substantial amount employs union labor or prevailing wage levels.
Now for your response Rick. What are the chances that you will accept this higher bid if all other details of the bid are equal?
Honesty is the best policy concerning your answer Rick.
Rick... I used fix cost contracts for installation labor around the world... One thing I learned over and over and over again... Low cost bids generally afforded me low quality workers. Those contractors who hired labor strictly on the basis of labor cost went out of business...
DeleteSo what you are saying is that it is now the responsibility of business to bring in unqualified people and as a part of its business model train them to qualify for a higher wage? While some business might see that is a reason for being in business, I don't believe it is the function of government or indeed a gang of other businesses to tell a company how to run itself.... that is for the employees and the customers to decide. You are saying your low cost competitor is being greedy... how do you know? Have you seen their books? Perhaps they make less profit than you do because they are stupid and don't know how to run a business effectively... Perhaps, even with using low cost labor they are ready to go bust... Perhaps its is because they are using low cost labor in the first place..... Using the government to fight your battles with the competition is pretty lame and your outlook proves that you haven't got a clue nor have you ever seen a business run without government interference...
As a post script, why, instead of complaining about the low wages that people get aren't you and your friends complaining about the cozy little relationship that the government and the fed have. A relationship that artificially pushes up asset prices to where people can't afford them. Historically house prices have been around 3 to 3.5 times salary... now they are more like 5 times and are well beyond the reach of most sensible people (not sucked in by the latest government housing gimmick). Wages remain low while stocks soar.... This is where you inequality comes from because poor people don't own stocks and wealthy people don't make their money in wages....
Honestly William I am going to investigate other aspects such as quality of work, finishing in time and budget, and then yes maybe I would take the highest bidder. It's not always about the money. Some cheaper bids cost more in the long run because the job is screwed up and has to be redone.
DeleteTS I didn't say it was a responsibility but it is a way to get good help that knows your systems. Everyone can't be fully trained when they walk through the door. These are the people that are commonly left behind that you have no concern for. I have made good workers out of many low skilled low educated workers. I ran a restaurant in Greenville NC where I had a P>O> knocking on the door almost every evening to see if his charge was there. Giving a chance, there is nothing wrong with it and I paid them well. Did I change their lives? Yeah a couple I did. Sometimes a person down and out, in trouble or unemployable just needs someone to believe in them. If I changed 2 out of the 6 lives then I feel my whole career in management has been successful. But believe me I have influenced more then a couple over my career. Success isn't only measured in profits my friend, community outreach is also good for business. Try it you might find a bit of satisfaction, instead of spending your life dogging these people.
DeleteRick, in these parts union or prevailing wages cost approximately 40% more than other equal and qualified bids. Push on the bottom of the wage structure and up go the more skilled labor categories.
DeleteReady to reconsider that bid now? Or is money no object to you.
I'm dogging no one, but you certainly seem to like ridiculing and presuming things of people that you know nothing about. While I wouldn’t call it exemplary, I think I have a decent record of volunteerism and charitable giving and certainly don't have a problem with training people but I do have a problem with people who know nothing of me, my business, business plan or my completive environment dictating to me that I must pay someone a certain wage.
Delete“TS I didn't say it was a responsibility but…” – No? I am either being forced to pay more than a particular labor is worth or I am forced to train that person up to a standard commensurate with that wage.
I often wonder over the last several years of the many businesses that closed their doors, because they had to pay for clerks when all they wanted was a janitor.
It is interesting to me in talking with certain groups of people how it is they who have no greed, they who are the most benevolent and caring; it’s just everyone else who is evil, heartless and uncaring. A human trait that is so pervasive it must be stomped out by the all knowing progressive, yet strangely, doesn’t afflict the souls, if the story is right, of 99% of the population.
I believe it has historically been the left that have shown how little faith they have in people’s ability to take care of themselves, so much so that they have made generations of families dependent on government intervention. Paradoxically it is the feminist movement that has taken itself out from under the umbrella of an eternal ‘provider’; writing songs like ‘Sisters are doing it for themselves’. I also believe it is the right who has been shown statistically to give more time, money and effort at helping out in communities. I am glad that you, in your capacity as a manager, have involved yourself in helping your community but keep in mind that, as a manager and not an owner, the bottom line and the depth of the owners pockets were never yours to see or loose.
Selling benevolence regardless of its effectiveness or lack thereof isn’t a particularly hard thing to do, dare I say it’s a damn easy job to sell it to the poor… for a vote of course. Doctor Spock sold being friends, because its easier, rather than parenting to a generations of nurturers. To advertise yourself as ‘Robin Hood’ to a group of venerable people is quite easy even though a more rigorous inspection of the results of social intervention and engineering shows that since the Great Society programs started in the mid 60’s, poverty in real terms has hardly changed but feel dramatically in the 10 years previous, yet spending on these programs has never stopped increasing. Education standards have been flat domestically and declining internationally despite per student spending being higher than any other nation on the planet. USA today reports that private retirement savings a somewhere in the vicinity of $20trillion so for those taught to save and live within their means, saving for retirement is possible without nanny hand holding. Minimum wage and extended unemployment show similar failings. As I said… the ‘Robin Hood’ story is an easy one to flog[Brit] but for the facts…. Those pesky facts…. But who cares about facts when your main objective isn’t benevolence but control.
And yes... if it is your own money that starts the business, perhaps, except for quality service and due care for the people that you do hire, particularly if you have to pay yourself minimum wage just to keep the doors open, the bottom line is the all pervasive consideration. Oh, by the way… my contracts all contained drop dead provisions so contracting subpar labor that required anything more than familiarization was not an option. To your point… Never can you hire someone who is 100% competent on ‘your systems’; that will always require training but basic skills in math and reading are no different, regardless of the job.
And still we don’t talk about the high cost of living directly attributable to government meddling.
Tuesday, January 28, 2014
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Carpe Diem
Milton Friedman responds to President Obama’s proposal to raise the minimum wage, the most ‘anti-black law in the land’
Mark J. Perry | February 13, 2013, 11:41 pm
From Milton Friedman:
The fact is, the programs labeled as being “for the poor,” or “for the needy,” [by politicians like President Obama] almost always have effects exactly the opposite of those which their well-intentioned sponsors intend them to have.
Let me give you a very simple example – take the minimum wage law. Its well-meaning sponsors [like President Obama]– there are always in these cases two groups of sponsors – there are the well-meaning sponsors and there are the special interests, who are using the well-meaning sponsors as front men. You almost always when you have bad programs have an unholy coalition of the do-gooders on the one hand, and the special interest on the other. The minimum wage law is as clear a case as you could want. The special interests are of course the trade unions – the monopolistic trade craft unions. The do-gooders believe that by passing a law saying that nobody shall get less than $9 per hour (adjusted for today) or whatever the minimum wage is, you are helping poor people who need the money. You are doing nothing of the kind. What you are doing is to assure, that people whose skills, are not sufficient to justify that kind of a wage will be unemployed.
The minimum wage law is most properly described as a law saying that employers must discriminate against people who have low skills. That’s what the law says. The law says that here’s a man who has a skill that would justify a wage of $5 or $6 per hour (adjusted for today), but you may not employ him, it’s illegal, because if you employ him you must pay him $9 per hour. So what’s the result? To employ him at $9 per hour is to engage in charity. There’s nothing wrong with charity. But most employers are not in the position to engage in that kind of charity. Thus, the consequences of minimum wage laws have been almost wholly bad. We have increased unemployment and increased poverty.
Moreover, the effects have been concentrated on the groups that the do-gooders would most like to help. The people who have been hurt most by the minimum wage laws are the blacks. I have often said that the most anti-black law on the books of this land is the minimum wage law.
There is absolutely no positive objective achieved by the minimum wage law. Its real purpose is to reduce competition for the trade unions and make it easier for them to maintain the higher wages of their privileged members.
Bottom Line:
minwageUpdate: The current (January) teenage unemployment rate was 23.4%, and 37.8% for black teenagers.
Bottom Line:
DeleteWhat do you call a person whose labor is worth less than the minimum wage?
Permanently unemployed.