I had a chat with Avery LIBRELLE, a liberal friend of mine at a local coffee shop in Saint Paul; Avery had just gotten off from a shift of answering phones for MPR’s pledge drive.
LIBRELLE: I’m glad the DFL are talking about raising the minimum wage. It’s time the working poor caught a break.
ME: Well, that’s kind of untrue. Most of “the working poor” work for more than whatever the minimum is. The vast majority of people earning the minimum wage are young, entry-level workers. Very few people over the age of 16 actually make the minimum wage – and those over 25 that do usually do it because of choices, good or bad or indifferent, that either they or their parents made.
LIBRELLE: Well, it’ll be good for them, too. More money is good, right? It stimulates consumer spending when workers have more money!
ME: Well, yeah, but where does that “more money” come from?
LIBRELLE: They’ll pay more!
LIBRELLE: Because the law will say so!
ME: Um…no, they won’t.
LIBRELLE: Sure they will. $9.50 is more than $7.25!
ME: Well, yeah – any minimum-wage worker will get more money per hour. But it doesn’t mean their employers will spend more, especially in a tough economy.
LIBRELLE: Well, that’s Bush’s fault.
ME: Be that as it may, look at it this way. Let’s say a store owner has $100 an hour to spend on payroll at her small business. That’s her labor budget; it’s what she can afford to spend, given the revenues she brings in, on labor, on top of materials, rent, utilities and a modest wage for herself – and just to keep from going crazy, I won’t add in all the service taxes she’ll be paying under Governor
Messinger’s Dayton’s tax proposal. Currently, that allows her to employ about 14 people at minimum wage. If the minimum wage goes up to $9.50, that means she can employ ten people.
And that’s not even counting the changes to the payroll tax, which bring it down to more like nine. And that’s leaving out healthcare. So – nine employees get a raise, and five get laid off. Meaning the nine who are left are going to have to work a whole lot harder.
LIBRELLE: The employer can just budget more for labor!
ME: Yeah, there’s not actually room in her budget to increase her labor costs by close to 50%. Not unless her business’ revenues zoom upward which, by the way, isn’t happening these days.
LIBRELLE: She can take it out of her salary!
ME: Did you catch the part about her having a “very modest” salary after all her expenses? If she tacks $40 an hour onto her labor costs, she’ll be working for free – which is less than the minimum wage. She may as well close the business, then – which means instead of laying off five, she’ll be putting all 14 out of work.
LIBRELLE: Maybe the workers should unionize!
ME: And that’ll increase revenues how?
LIBRELLE: Why do you hate children?