Why Doesn’t A Minimum Wage Work?

Ludlow massacre - working families

Laboring Families Right Before The Strike & Ludlow Massacre

If a minimum wage worked, then shouldn’t just one minimum wage last forever?  With inflation caused by the Federal Reserve and central banks around the world, people’s  minimum wage continually loses purchasing power requiring higher “minimums”.  Realistically, why not have $100 an hour minimum wage?  Then even the poorest people could get rich – right?  And, you can ask any business person what happens when costs go up – costs get cut.

What is the highest cost, with rare exception, that any business has?  The answer to that is labor.  You have to pay the hourly wage, workmen’s compensation insurance, health insurance, unemployment benefits, sick pay, paid leave or vacation, and other work environment safety measures such as OSHA and EPA.  So, what’s the logical thing to do for a business owner – cut personnel and get more out of the remaining personnel, or as we are seeing now, with sky high labor costs, it is more cost effective to go to robots which don’t get sick, arrive late, miss work, take vacations etc.

So, will a $100 an hour minimum wage make everyone rich; well, maybe not.  If I’m a highly skilled plumber, or electrician with 20 years of experience and expertise, and the minimum wage is $100 for someone who is 16 years old and has no skills, then I’m either going quit to go flip burgers for $100 an hour, or what is more likely, I’m going to strike for higher wages, and because I’m so much more highly trained and experienced than the 16 year old, I’m going to ask for a raise to $125 an hour, and I’ll get it.  And, every other skilled worker will get it as well.

So, the 16 year old flipping burgers will cost the owner of the restaurant a whole lot more in labor, so the price of a burger will go up to $15 and fries up to $5 and a soda for $3.  Now, you as a family man/woman with a white collar position and family responsibilities will look at the cost of taking your spouse and two children out to McDonald’s for an evening meal that costs $98 + tax (4 burgers, 4 fries and 4 sodas) will say to yourselves that you need a raise, and you will get one.

Pretty soon everyone’s gotten a raise; prices will have gone through the roof, and everything will be back to where it was, and the poor working classes will need another raise in the minimum wage, and so the vicious bank inspired cycle of corruption of our currency continues.  No minimum wage will ever work for anybody but government demagogues, bankers and other hucksters working behind the scenes to corrupt everything they touch.

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2 comments

  1. Nicola Paden · · Reply

    Why does minimum wage work in other countries? I live in Netherlands for example, we have minimum wage (9.72/h for 40 hr contract for 21 and older) and mcdonalds large menu costs about EU8.50

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    1. A minimum wage never works ideally, although depending upon various economic, political and cultural nuances, it can have limited benefits. Human nature has never changed. Human nature is, among other things, a desire and effort to preserve one’s own well being. An employer is going to make a profit, or he is not going to be an employer – the risk and effort is not worth it based upon nothing more than altruism. If the minimum wage (it will drive up prices) drives up prices to the point of reducing sales, then people will lose their jobs, and the remaining people will have to pick up some of the slack of the people who are let go. That will work for a while until it becomes too oppressive, or maybe even impossible, and it requires a fine balance. If a nation can find that fine balance, that’s great, and it’s not impossible. On the other hand, the government likely is going to micromanage things and ultimately throw a monkey wrench into the equation. Take for example also that a $15 minimum wage in San Francisco, or Washington D.C. will be likely too little, while the same minimum wage in Wichita, Kansas would make the average worker almost wealthy. One size doesn’t fit all.

      In America, the big lament is that people can’t survive on the current minimum wage. Well, why not? The reason can be answered in detail in some of this BLOG’s historical pieces on money, inflation, and banking which you can search out, and which I will not reiterate here other than to say the bankers are working assiduously in their efforts to destroy the currency, and in doing so they create the “need” and “demand” for a minimum wage. The free market – something America has not seen since the early 1900’s – is the best regulator or prices and wages. It responds immediately and accurately. A government edict takes studies, debate, voting, amending laws and all of that takes time, so by the time the law is implemented, the market has already changed.

      So, a short answer, if that’s possible, to why the minimum wage works in “other” countries, is that each country functions under different rules of government, ideology, cultural norms, levels of greed, perceived needs and standards etc., and as such, a minimum wage can have a moderately stabilizing effect on an economy. That will by far and away be the exception and not the rule, and it will not last long. In my estimate, it will only work for a decade or two before it starts to get out of hand and fall apart. If a country has honest money and banking (not likely in the western world), then the chances for success are enhanced. It is also possible, that the government or the media or both are lying about the fact that it is working.

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