Thursday, November 30, 2006

Minimum Wage Math Made Easy

The current proposal to raise the minimum wage from $5.15 to $7.25 represents a liability for a business owner of $84 a week per employee or $4200 for a 50 week year.

Imagine you have a small store with ten minimum wage employees and your government is telling you that your labor expenses for the same people doing the same work is about to go up nearly $50,000 -- don't forget about the Social Security taxes.

What are you going to do? How many more hamburgers are you going to have to sell just to break even? Remember that you don't just need to make $50,000 more, you will need to make $80,000 more because you have to pay taxes yourself.

Maybe you don't own a small business.

If you depend on a small business with minimum wage employees for anything, are you willing to absorb the higher prices they will be forced to pass along? If you cut back on your spending even a little bit to compensate for the increases, the business owner's math gets even harder to justify.

Fortunately for the economy, not too many businesses rely on workers right at the minimum wage. Those who do usually hire teenagers or people who don't have a family depending on their income. Pricing those people out of the economy will also not have a terribly huge negative impact on the economy.

But this does absolutely nothing to alleviate the ravages of poverty. Nothing at all. It's just a tax increase on small business and a small-time job destroying initiative. And it is the top item on the agenda for our new Congress.

Aren't you proud?