Thursday, 22 June 2006
US Senate Kills Minimum Wage Hike
« The Left's Favorite Chant | Main | U.S. Eliminated From World Cup »The United States Senate barely killed a proposed election-year increase in the minimum wage. The economically challenged Senators garnered 52 votes. Thankfully, not enough to call cloture. The bill would have raised the rate from $5.15 an hour to 7.25 an hour. An increase of 40%!
Let's go over again why this is a bad idea. The minimum wage is an arbitrary minimum value set for wages that is generally above market forces. By doing so it causes the costs of labor for a company to increase. To handle the increase in costs they employee must either lay people off or increase the costs of good. Generally, they will take a mixture of these two approaches. Both of which are not good for consumers. Let's take a look at an example of a grocery store.
Most grocery stores hire kids in high school to work the cash registers, clean the floors, and stock the goods. Let's say they are paying these kids $6.00 an hour. The fair market price. Now we come an increase the minimum wage to $7.25 an hour. That immediately increases the cost of labor for the grocery store over 20%. Let's say the store needs 500 hours a week in student labor. At $6 an hour that is $156,000 a year in labor. With the new minimum wage that cost in labor becomes $188,500 a year in labor. An increase in $32,500. Let's say they fire one part time employee to cut their hours back to 480 a week. That would sill be a cost of $180,960. Still over $25,000 more in labor than previously. The grocery store has no other option than to place higher prices on goods sold. Thus increasing the cost of basic staples.
So not only would someone lose their job, but the poorest people would be the hardest hit by the increase in the cost of basic staples necessary for living. Thus we clearly show that the minimum wage really hurts those it supposedly protects.
