California raises their Minimum Wage, condemning some to Remain in Dead-End Entry-Level Jobs Forever

Posted by PITHOCRATES - September 28th, 2013

Week in Review

Those who don’t understand economics always want to raise the minimum wage.  Because they think it will help unskilled workers.  But it actually hurts unskilled workers.  For a couple of reasons.  It will increase the cost of business.  Especially for small business owners who survive on thin margins.  If they have a few minimum wage workers an increase in the minimum wage may force the owner to lay off one of them.  Or more.  It is often that or working at a loss.

Another way minimum wage workers get hurt by a higher minimum wage is that it will keep them in a minimum wage job.  Where they never will earn much.  Causing them to struggle throughout their life.  You see, minimum wage jobs are entry level jobs.  Unskilled jobs for the unskilled.  So they can get some working skills when they have little to offer an employer.  Which is why historically high school kids and college students work these jobs.  Gaining useful job skills to apply to a future career.  Where they will earn a lot more.  Allowing them to raise a family.  It’s why people go to college.  To earn more money.  As they didn’t expect to get a ‘living wage’ without this higher education.

So raising the minimum wage is not in the best interest for minimum wage workers.  Unless they want to remain in dead-end jobs for the rest of their life.  After all, these jobs are often referred to contemptuously as ‘hamburger-flipper jobs’.  But state governments are always willing to keep people in these ‘hamburger-flipper jobs’.  Why?  For the votes.  Which is why California is raising their minimum wage (see California raises minimum wage to $10 by Melanie Hicken posted 9/25/2013 on CNNMoney).

The state’s minimum wage will gradually rise from $8 to $10, under the law signed by Governor Jerry Brown Wednesday morning. The hourly rate will increase to $9 on July 1, 2014 and to $10 on Jan. 1, 2016…

More than 90% of minimum-wage workers in the state are over the age of 20, while nearly 2.4 million of the state’s children live in a household with a parent who earns minimum wage, according to the statement. The pay bump would boost a full-time worker’s income by about $4,000 to around $20,000 a year.

The next time you go to a McDonald’s count the people working there.  There are a lot people.  Sometimes 8 or more.  Let’s look at that additional $4,000 in a worker’s income.  Which if you add taxes and other employee expenses let’s say it costs the employer $6,000 per worker.  If there are 5 employees that’s an additional $30,000.  Most McDonald’s are franchises.  Basically small business for one single small business owner who pays a whopping franchise fee.  For the privilege of having to do no marketing to get people to walk through their door.

Let’s assume an owner clears $100,000 in profits for his or her own salary.  And works 80 hours a week to earn that.  So his or her spouse can be a stay-at-home parent for their children.  Who bought the business so the two of them didn’t have to work.  Each earning $50,000 to make the house payment in a nice neighborhood with an excellent school system.  With the raise in the minimum wage this business owner will take a $30,000 pay cut.  Making it difficult to pay his or her bills.  Which will force them to lay off some workers and work more hours.  Or close the restaurant.  So they can get a job.  The spouse, too.  So they can afford to stay in the house they worked so hard to afford.  And keep their kids in the school they worked so hard to put them in.  Turning their kids over to daycare as they become working, part-time parents.

Business owners are not all getting rich.  More businesses fail than succeed.  Some make a lot of money.  Some lose a lot of money.  While every month is a struggle to meet their cash-flow needs.  And increases in the minimum wage won’t make this any easier.  It will just increase their costs.  Making it harder for them to stay in business.  And if they go out of business then that higher minimum-wage won’t help those minimum-wage workers.

Of course the question that just begs to be asked here is this.  Why is it that so many families have to rely on entry-level jobs to raise their families?  Is it because the Californian educational system failed them and they’re unable to go on to college?  Is it because the taxes and regulatory costs in California are so onerous that it is hindering job creation in better paying industries?  Or is it because people are so sexually active in high school that they’re having babies before they have an established career?  Or is it because they choose to remain in these hamburger-flipper jobs because the minimum wage plus a generous welfare state is enough to make life comfortable?  This is the more important problem to resolve.  What is putting these people in these dead-end hamburger-flipper jobs to begin with?  For these people would be far better off advancing out of these entry-level jobs than staying in them forever.

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