Saturday, April 3, 2010

Why I HATE the Minimum Wage

Why I Hate the Minimum Wage

(NOTE: All names used herein are fictional and do not refer to any known real life person.)

Back on October 24, 1938, when the Federal Government set the first minimum wage at twenty-five cents per hour people lost the right to negotiate for themselves how much their time and effort were worth. It was no longer an "experience counts" and hard working employees make more verses inexperienced, or lazy workers thing. It became "everyone starts at the same rate" and no choices were offered.

That amount rose steadilly and became a source of discrimination in 1961 when there were different categories of workers: "large retail and service enterprises as well as to local transit, construction, and gasoline service station employees" or employees of farms or "nonexempt" workers. Depending upon where you worked in 1968, you could be paid as much as forty-five cents more per hour because the minimum wage dictated so. Does that sound like a fair practice?

Nowadays, it's an exception between the nonexempt workers and the exempt workers and the federal government participates in age discrimination: "A subminimum wage -- $4.25 an hour -- is established for employees under 20 years of age during their first 90 consecutive calendar days of employment with an employer." If you are a day over twenty, you must be paid -- according to federal law -- $7.25 per hour. That's a three dollar difference decided by one day. Is that fair?

Did you know there were differences? There are.

The thing that minimum wage earners do not seem to understand is that they could be worth more if they negotiated on their own behalf. When people get high-powered, high paying jobs, it isn't because the federal govermnent was involved and decided what their wage was going to be. It was because they knew their education, their experiences, their insight, their qualifications made their services more valuable than a government set wage. They walk into a potential employer's office and know that they want $80,000 for their base pay, full benefits including medical coverage, vacation pay and flex time (or PTO). They get it there, or they move on to a company that will pay them what they think they are worth (or they have to re-evaluate their self-worth).

Let's say that Sam Smith went to Harvard and got his degree in Mechanical Engineering with secondary studies in Business Management. He graduated in the top twenty percent of his class and he has some work experience but it was working at a fast food restaurant and a paper route when he was in his teens. He's now twenty-four and he's going on his first job interview since he was sixteen. He walks into the "Manufacturing X" company in time for his appointment, gets shown in and shakes hands with the personnel manager and the department head he would be working under. They talk and the "Manufacturing X" company likes what they see. Do they offer Sam Smith minimum wage because this is his first job in years and he's basically starting over, and it is the government mandated wage? No. He gets to say what he is expecting to earn. They get to say, "Well, yes, we can do that," or, "Sorry. We could offer you fifty. Would you take that?" It's then up to Sam Smith to decide his own value.

Same holds true with someone just getting their first job at a fast food restaurant, a grocery store or a car wash. Ken Kirk is perpetually punctual, hardly ever gets sick, is good at making change, is driven to succeed and is shooting to be promoted at least once (preferably twice) within the next six months. Lenny Ladd walks into the same establishment, has a track record of working for a similar establishment, but has been sick often, has a history of putting nominal effort into his work and sometimes was as much as $5.50 off in his drawer count at the end of the day because he has a problem making change. There are two identical jobs available. Ken Kirk talks to the manager and impresses him very much. Lenny Ladd has experience and the manager needs experience. They both get hired and they both get paid minimum wage for the first six months of employment.

Problem is, the manager has to pay Lenny Ladd the same wage as he has to pay Ken Kirk when it is Ken Kirk who has made a huge difference in the first two weeks of his being employed and Lenny Ladd has done just about nothing extra. Due to the minimum wage, there is no money to give Ken Kirk a raise; nor can Lenny Ladd be fired because a second worker is definitely needed; even if it is a nominal worker. Ken Kirk has to wait until there can be more money in the budget for his raise. Six months pass. Ken Kirk has been noticed by other employers and he is being offered other jbos. Loyalty makes Ken Kirk want to stay; money makes him want to go. Ken Kirk makes a decision to stay for two more months, just in case things get better. Two months later, Ken Kirk is still making minimum wage and Lenny Ladd is getting lazier.

Even though Ken Kirk absolutely loves working there, and loves what he is doing he decides to leave the company because he can't see himself going further up the ladder due to Lenny Ladd's employment costing his employer equal pay for less work than Ken Kirk was putting into the job. Ken Kirk leaves his employer and makes two dollars more per hour at his new job because of his positive work attitude, drive and contribution to his employer. Lenny Ladd is still at the store and still making minimum wage with his boss trying to decide whether Lenny Ladd is worth it because the boss can't find anyone else to take the job.

Ken Kirk's decision was right for him only in the dollar and cents mode. Emotionally, Ken Kirk felt like a traitor because he respected his boss and had a fond attachment to him. He felt resentment toward Lenny Ladd for costing Kirk his dream job, and he considered his first job a failure because of his decision to leave and he carried that with him the rest of his life.

This isn't as far fetched as you might think. There are employers out there every day who have a similar situation: go-getters who cannot be given a raise due to minimum effort minimum wage employees who take up pay and space and do just about no work. Yes, they could be fired (as long as it's not a union job), but they would only be replaced by someone else making a minimum wage and the people who deserve more money wouldn't be receiving it because of that minimum wage being forced upon the employer. The employer is stuck with the inability to reward good workers for their effort; or to discipline bad employees for their lack thereof. Money is supposed to be a good motivator, but for some it is not. Firing those who do no work only begins the cycle again and means training another new worker and making the HR department work harder to do the processing out and in. Training time means down time and that means money lost; at least with the slacker he was already trained, even if he's producing 3/4 of what he could be doing.

Minimum wage is a trap for both the employer and the employee. There is no negotiating, no figuring out what you are worth, what the job is worth. It's here: take it or leave it because this is what the government says we have to pay. Minimum wage depletes creativity (who wants to be more creative and make more effort than the Lenny Ladds of this world and still receive the same pay?), depletes initiative, depletes drive. It's a job that will pay you no matter what as long as you show up and you can always get another job that will pay you that same amount as a newbie, so why bother with effort?

Minimum wage is a vacuum of despair. I heard so many people at my last job complain that they were "stuck" there because they couldn't get anything better (no matter what their pay was). I have heard so many people in other jobs decry their pay because they "couldn't do better". They never tried. They heard that the minimum wage job they were in was basically their only choice because if they changed jobs, it would just mean downtime and they'd be paid the same thing at the new job -- no matter how long it was between jobs -- and they are raising three children on that minimum wage job and it's hopeless.

Even though minimum wage is said to be ensuring a "living wage" for everyone, it is a farce. With gas, food, electricity, water, housing costs as high as they are, the "living wage" has never been a "living wage": never. In 1938, at twenty-five cents per hour, the minimum wage earner made $520 per year. The average cost to raise a family of four with food, shelter and clothing outstretched the minimum wage (see the chart on the third page) and it has every year since its inception.

The minimum wage is an useful tool, however. It keeps people believing that if they rely on the government to do things for them -- to "give" them health care, to "pay" for their car, to "demand" a living wage for them -- then all they have to do is show up at work and do minimal work. They don't have to meet standards and they don't have to work hard to get ahead. They will -- probably at the next big election cycle -- get a raise automatically when the minimum wage goes up to buy more votes for re-election. Very useful for those who are willing to keep people down and to keep them ignorant of the true price of their vote and of their own willingness to let others do things "for" them. Remember, it's not always "for" you. When it is a politician doing it, it's usually "to".


  1. I'm confused. What sort of impoverished business does Ken Kirk work for that they can't afford to give him a raise? Why would he want to work for a failing company when he can go somewhere else and make more money? You seem to be under the impression that the minimum wage is high. In fact, the moral of your story seems to be, "Isn't it a shame that companies have to pay their employees a livable wage?"

    From your post I can't figure out if you've ever spent any time in the work place at all. I also can't believe you're drawing some sort of equivalency between the value of a person who has trained for a demanding job by going to school and a person who would be earning the minimum wage.

    You are aware that minimum wage is pretty low, right? And that most people earning minimum wage work at places like McDonald's? Do you really think a person would be able to argue for a better salary at a McDonald's?

    The fact that it's a huge corporation and would probably set a certain minimum wage for itself, guaranteed to be as low as McDonald's could get away with aside...

    Some people are worth more in the workplace than others, that's inevitable. Those with the capability to do so will earn better than the minimum wage.

    I mean, I could go on and on... so Lenny Ladd is supposed to settle for a reduced wage so Ken Kirk can get a higher pay? Suppose Lenny Ladd starts working harder and becomes more valuable to the country? How will they give him a raise? What kind of company is this?

    I mean, you negate your own point. The minimum wage isn't even SATISFACTORY. Do you really think businesses will be so charitable?

    In your world, where businesses can barely afford the minimum wage, why would they pay anyone any substantial wage? All they do is convince some Ken Kirk to work for what he believes to be a satisfactory sum but is hardly what he is worth, then pay all the Lenny Ladds to do the grunt work for nothing, then pocket the money and run.

  2. Joseph, I have to respond in two posts because I have a limit in the number of characters I can use. Here's the first part.

    I think you may have read what you wanted to see in my blog.

    You said, "What sort of impoverished ...."

    RESPONSE: The company is an average mom/pop grocery store and they're not impoverished; they're over regulated. They make enough to have two employees for their store, but they don't make enough to have them both and give one the raise he deserves. Their company is not failing, it is struggling, but not failing. It is making ends meet. And, my point is tha the minimum wage, historically speaking and according to the research I linked to, was never a living wage. Never. So why would my point be that it was a pity that companies have to pay their employees minimum wage when it was never a living wage to begin with? My point is that the minimum wage IS an unlivable wage, and should not be something that the government should be doing. The company and the employee should decide how much the employee gets and that would lead to faster raises and a freer market.

    You said, "From your post I can't figure out..."

    RESPONSE: The reason you may not be able to figure it out is because I never stated one way or the other. There IS an equivalency between the person with a degree and a person without: they're both employees and they both have intrinsic value to the company. MY POINT is that it is up to the employee and the company to decide what that value to the company is, and not the government's decision in either situation. Do you not think that employees who got their degree are covered by minimum wage laws as well? The fact that they normally receive a much higher compensation does not negate the fact that they are also covered under the law.

    You said, "You are aware that minimum wage..."

    RESPONSE: Yes. I am aware of the minimum wage, but I happen to think it is pretty high, actually. And, no, most people working under the minimum wage don't necessarily work at McD's; they work everywhere. And, yes, if the minimum wage were abolished, McD's would have to negotiate an employee's starting salary, just as Mircosoft does with their college grads.

    You said, "The fact that it's a huge corporation..."

    RESPONSE: That "as low as possible" wouldn't last long if people realized that Wendy's were paying 25¢ more per hour and McD's couldn't hire people to work for them because of their lower wage, now would it?

    You said, "Some people are worth more..."

    RESPONSE: Exactly. That's why minimum wage should be done away with.

  3. Joseph, Here is the second part of my response:

    You said, "so Lenny Ladd is supposed to settle..."

    RESPONSE: Lenny Ladd would be getting what he was earning by his own actions: a reduction in pay it would be his own doing. If Ken Kirk got a pay raise from Lenny's pay reduction, wouldn't that teach Lenny something? For you to "suppose that..." is changing the scenario and the argument. But, suppose he does. Then wouldn't it be good for the company and bring in more money for the company, therefore earning him a raise?

    You said, "I mean, you negate your own point..."

    RESPONSE: I do not negate my own point. You just said so with your statement: "The minimum wage isn't even SATISFACTORY." That IS my point! And, I think businesses would be more "charitable" if not controlled by the government. Although charitable is the wrong word to use because it isn't "charity" to pay a productive employee.

    You said, "In your world, where businesses..."

    RESPONSE: In my world, businesses would be able to afford BETTER wages: no one said "substantial". They didn't "convince" Ken Kirk to work for "a satisfactory sum"; he convinced himself because he liked the company. It was his choice, not theirs. In my example, Lenny Ladd wasn't hired to do the grunt work; he was hired to work but barely working at all. And the company wasn't making enough money to pocket and run.

    Read what I wrote, not what you read into it. Check and find out for yourself what the minimum wage has done to America by researching it for yourself. Start here (copy and paste) . See where it states, "recent research has shown that higher minimum wages reduce teenage education levels and decrease workers’ long-term earnings."?

    Then you may wish to check out the Economic Policy Institute's minimum wage search results: . Read them. You'll learn something. Do all of this and I bet you will no longer like the minimum wage, either.


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