A $15 Minimum Wage Will Destroy My Business Model

I detest that my taxes are going to pay for a program like Food Stamps.  Food Stamps, now called SNAP (Supplemental Nutrition Assistance Program), is a subsidy that encourages bad behavior.  SNAP is a Socialist Program that uses my tax dollars to allow people to shirk their responsibilities and leach off Americans who work hard and pay taxes. These people do as little labor as possible yet live the life of Riley.  These people expect the rest of us to pick up the tab while they party.

I’m talking about Corporate Persons.

When people like Ronald J. McDonald, Samuel Walton XII, Duncan D. O’Nuts and John S. Papa pay their employees less than a living wage, we all pick up the tab through SNAP and Medicaid.  When they fly across the country in private jets, stay in luxury hotels and party the night away at Trade Conventions and we pay for their party; they write it off as a ‘business expense’.  That's another Socialist Program is would like to see ended, but another rant for another blog.

A 2014 study by the Center for American Progress and the Institute for Research on Labor and Employment concluded, “The decline in overall SNAP spending equals about 15 percent of the total resulting increase in wages.” What does this mean in real dollars?

I made my own rough analysis of the impact of raising the Federal Minimum Wage to $15.00. Using data from ‘Characteristics of Minimum Wage Workers, 2014’ (U.S. Bureau of Labor Statistics), 1.3 million earned the Federal Minimum Wage of $7.25/hour and 1.7 million earned below the Federal Minimum Wage.  That totals 3 million natural-born persons.

Currently, SNAP is available to households of four with annual incomes below $31,000/year (130% of poverty) and total benefits.

Assumptions:

·       Those earning below the federal minimum  wage earn an average of $6.00/hour

·       The number of people earning between $7.25/hour and $15.00/hour equal the total  number earning the minimum wage or less; their average wage is 12.00/hour.

·       Total annual income based on an average of 2000 hours/year

The resulting increase in wages throughout the economy would be $68.75 Billion per year; equating to a reduction in SNAP costs of $10.3 Billion per year.  That alone should be a sufficient argument for raising the Federal Minimum Wage to $15.00.

But those against raising the minimum wage claim:

‘McDonalds, Duncan Donuts, Papa John’s, Wal-Mart will have to raise prices to cover additional costs.’

First, I don’t spend my money at those places but I still have to subsidize their payroll.  I personally don’t care if McD raise their prices.

Second, studies have shown that McDonalds’ menu prices would only increase by about 10% for profits to remain the same. That is $4.5. Billion in profit for 2015. (updated 6/29/2016)

Third, if they held the line on prices, they would have to accept a 10% reduction in profits and I believe Ronald can live on $4.1 Billion.  What a hard knock life.

‘Business will cut jobs.  More people will be unemployed and there will an in increase unemployment with resulting increases in SNAP spending and other assistance programs.’

A business requires a minimum number of work-hours a day to operate efficiently.  When businesses cut employee hours below that number, they sacrifice customer service.  If their service level drops too low, they begin to lose customers, net revenue decreases and a death spiral ensues.  Business owners will maintain employee hours to meet the level the service level they aspire too. Good owners will make sure they provide service that will assure return customers.

Yes, some businesses will cut jobs.  However, many low wage earners hold two or three jobs in order to make ends meet.  When they earn $15/hour rather than $7.25/hour, they will not NEED to work several low paying jobs.  Many businesses will see some employees quit. If people have multiple jobs, they will quit one or more of those additional jobs to have quality time with their family.  Maybe even go out to eat occasionally.

‘It will hurt small businesses the most.’

What do you define as a ‘small business’?  When those in congress who oppose the raising the minimum wage use the term ‘Small Business’, they are referring to business with 400-600 employees.  I define a small business as a mom and pop shop with 5 to 10 employees, 100 tops. 

If a real small business, run by real entrepreneurs, must cut employee hours to survive, then the owner personally will have to pick up the slack themselves.  That is what it means to build a business with sweat equity.  If they want to claim 'they built it', they should build it with their hard work and not with wage slaves.

‘I only make $15/hour now and I have special training.  A burger flipper doesn’t deserve $15/hour’

Any person who works 40 hours per week does not deserve to live in poverty. PERIOD.

If you have specialized training and are only earning $15, you are probably worth $25 to your employer.  Don’t blame the burger flipper because you are underpaid. It is your boss who is exploiting you, not the burger flipper.

‘Those minimum wage jobs are held by high school kids.  They live with their parents. They don’t have a family.  Why should they make $30,000 a year?’

The fact is workers between 16-19 years of age represent only 15% of those earning the Federal Minimum Wage or less.

However, I believe there should be a special exemption to the minimum wage for full time students claimed as dependents by a parent or guardian.  $10/hour for the first 20 hours; $15/hour for the next 20 hours and time and a half over 40.  Businesses would be limited to 15% of their entire payroll for pay to employees with the student exemption.

Let me debunk all the myths perpetrated by those who favor paying employees the least amount possible with this:

If your business model is dependent on me subsidizing your payroll through my taxes, there is something wrong with your business model and you do not deserve to be in business.

Look on the positive aspects on the economy with a raising the minimum wage.

Besides a reduction in SNAP spending, our sluggish economy will get an infusion of cash.  CEO's benefitting from paying a low minimum wage, earn well in excess of what they spend each year. Some is put into bank savings and indirectly helps the economy. However, many invest a significant portion of that excess in Wall Street instruments; effectively removing it from circulation.  People earning below $30,000 per year spend every dollar they earn.  Their spending has a multiplier effect on the economy.

Raising the minimum wage to $15 will give 6 million people additional income.  Income subject to income tax.  We will have more people paying more taxes reducing the tax burden on the rest of us.  Some of the net income will be in excess of what they need to 'just survive'. 

More people will not be working 50 hours a week. They will have time to spend with their family and have a little extra money to allocate to frivolous things like going out to eat.  This will increase demand at restaurants.  Restaurants will hire more employees and buy more supplies.  The restaurant supply companies will see an increase in business and need more employees. As demand grows, new restaurants will open to absorb the demand.  This means even more jobs in the restaurant industry; more jobs in construction, architecture and engineering.

More money will cycle through the economy; there will be more people employed at all wage levels.  More people will have more disposable income.  More people will go out to eat more often creating more demand for restaurants.  More people will buy more things. More stores will need to hire more employees and stock more merchandise.

Now, if only that merchandise was made in America by Americans earning middle class wages and not in totalitarian Communist Countries in Asia by workers who are effectively wage slaves; but that is another rant for another blog.