A Cure for Toothaches

Lately, there has been a lot of talk about raising the minimum wage again after about ten years of having it at its' present level. Simple lesson for those not following along in the textbook...if you raise the minimum wage, the retailers have to pay their employees more, so they raise their prices for goods and services. For those making the minimum wage, the buying power of their check is the same. Anyone making more than minimum wage doesn't get a raise, so the buying power of their check is reduced.

I know that it makes people feel like the government is doing some good, that's why politicians are pushing for it...to make you think they are making things better while not changing anything. Congress definitely doesn't want an angry mob storming the capitol when they realize what the government is really doing.

Okay, for the simple people that are about to write me a nasty note (both of them)...I'll dumb it down some more.

Let's say (for the sake of simplifying) that a combo meal at a fast food restaurant costs the same as what the minimum wage is...for this illustration, let's say seven dollars. Let's raise the wage of the person that makes the meal to eight dollars an hour. The fast food place isn't going to pay its' employees more money without bringing in enough money to make up for the added cost...so they either reduce the amount of food in the combo meal (which they would never do) or they raise the price to eight dollars for the meal. If they reduce the amount of food, you will have to buy more to get what used to be included in the meal...which means, either way you are spending more to get the same as you used to get for seven dollars.

For the person making the (now) eight dollars an hour, it still would take an hour of work to buy the meal...just like it was before the price went up. For anyone making above minimum wage, it would take more labor to earn the money for the meal than it used to...reducing their ability to buy things.

What I left out of the illustration is that the employer could also hire illegal aliens for less than minimum wage, outsource the labor overseas or build a robot that can do it. Those solutions would reduce the available jobs (for legal citizens in the case of hiring illegals) and drive wages lower, so, any solution they decide to use will make the situation worse for the average worker.

Raising the minimum wage to help people uses the same logic as punching someone in the stomach to get rid of a toothache. If you're having to think about that analogy, you might want to read this post ten or twelve times before making a comment.