Letters to the Editor for Thursday, February 4, 2021.
The Human Factor.
This letter is food for thought in the court of public opinion. It is my personal opinion based on my life experiences and not politically motivated in any form. I offer no guaranteed solutions to the issue that I am about to discuss, that being the proposed $15.00 per hour minimum wage across the nation.
Although I believe there are areas within the US. Primarily larger cities and resort areas where cost of living is exceedingly high that would warrant this, there are far greater areas in the rural US where the cost of living is not high that will be devastated by the same event.
In any case, I am not an economist, but I do have a unique perspective on what I believe will transpire. In an early part of my life, I worked as a factory worker, belonged to the union, etc. Later in life, I became a small business owner with employees of my own. So, I believe I have the ability to see both sides of this coin and bring to this conversation the human side of the equation.
Economists have been to college and can crunch the numbers and they can make predictions of how all this will turn out once implemented, but they do not understand the human factor which must be considered, they cannot, as most have never experienced the situation that is about to unfold. All the schooling in the world will not help you as does real life experience.
So, let us get to the meat of the issue. Yes, it is grand that the federal government can and probably will mandate $15.00 per hour across the board.
There will be many people that will initially benefit from their newfound raises, that is, if they are one of the lucky ones that will keep their jobs. If you think for a single instant that the owners of these businesses that will be required to pay the increase wages will not pass that cost on, or reduce workforce, I have a bridge I would like to sell you.
As a former small business owner, I see four things that may likely happen.
First, the cost of the commodity of service will increase to the consumer you and me. Second, reduction in the work force to offset costs, requiring those workers left to work harder for the pay increase. Third, many small businesses will close the doors as they cannot sell their products high enough to make the business profitable. Fourth, businesses that can afford it, big box companies, will automate, thus reducing its overall workforce yet again. This has already started, look at Walmart, Home Depot cashier systems.
It does not stop with that. Increasing to $15.00 will have a cascade effect.
Let us say that Joe/Jane has worked for XYZ company for 10 years and they are making $15.50 per hour, they worked hard to get to that point maybe even went to school to be able to make that. Now suddenly, an entry-level employee that say would have started at $8.00 per comes starting at $15.00 per hour. Joe/Jane are not going to be happy because they worked hard to get where they are. They too will want an increase of the same amount. All the motivation to better themselves and get ahead in life is taken away in one instant. That is part of the human side that economists may not see and is not spoken about. The increase will need to be across the board with all hourly employees. We just shifted the household income numbers up a notch and not improved anything.
Having been in a union, I believe, the screaming will start instantly, and every pay grade will have to be increased by the same amount as the minimum wage increase. If you are in a union, you will have someone fighting for your increase. If you are not, then you will be at the mercy of the will of your employer and their ability to provide the increase and stay in business.
Either way, the cost of living across the board will increase, the poor will remain poor as they must pay more for the items and services they wish to purchase, rents will increase as much as the market will bear, real estate costs will increase. Workforces will be reduced as well. Companies will not and cannot lose money as they have stockholders to placate. If you are looking for a more secure investment, see at this link to learn about fx trading by VT markets.
There is one major kicker and that applies to many of you that live in our area. A new class of people will become impoverished, this being the elderly and those currently living on Social Security incomes. Many live on the edge now. There has been no discussion about increasing Social Security benefits to make up for what will be a major increase in the cost of living. Not only will we still have the original “poor” who are making more money, but you will have those elderly on fixed incomes who may become destitute unable to purchase basic items for survival.
As I stated in the beginning of this dissertation, a gradual increase minimum wage based on locations might work. But it should be based on cost of living in each area of the country and even vary within the borders of each state. What wage might be needed in Miami might not be needed in say, Fellsmere Florida. The increases should be gradual over a period of time to potentially avoid closing down of mom pop shops and local businesses. I believe running headlong into an across-the-board standard minimum wage increase of this magnitude is a massive mistake and will have dire consequences for many.
I do not have the answers, nor do I guarantee that the picture painted above will unfold as I see it, but it is something to consider and ponder and possibly prepare for in advance.
Perhaps some of you can see a side that I do not see and could propose a ray of hope which we all could use.