Minimum wage hikes trigger 'payroll tsunami,' as small businesses cut back
Recall the old adage: "The road to Hell is paved with good intentions"
Raising the minimum wage puts the squeeze on the employer of low skill workers. The value add just isn't there.
From the article:
"Small business owners across the country are beginning to feel the pinch as more states move toward a $15 minimum wage.
While proposals to raise pay are intended to help workers, several mom-and-pop coffee shops as well as restaurants are responding by cutting hours, eliminating jobs or closing down entirely because they can't keep up with rising wages under the law."
Raising the minimum wage puts the squeeze on the employer of low skill workers. The value add just isn't there.
From the article:
"Small business owners across the country are beginning to feel the pinch as more states move toward a $15 minimum wage.
While proposals to raise pay are intended to help workers, several mom-and-pop coffee shops as well as restaurants are responding by cutting hours, eliminating jobs or closing down entirely because they can't keep up with rising wages under the law."
The first part of this is for us all to become more efficient and consume less of the "stuff" that we really dont need. That cuts sales taxes, property taxes, excise taxes, government fees, etc. Then you can make less and pay less income taxes. I estimate that everyone could cut 10% in their expenses without really significantly changing their lifestyle. Less money for the collectivists will mean they just cant do as much to hurt us.
Fortunately, this ISNT true. Producers are getting more and more fed up with being the fools in this scenario, and are taking actions. Automation of all types in the long term and moving production to china and other places as well as turning our workforce into part time workers in the short term are a couple of ways producers have been .
"adjusting".
Small companies are just eliminating workers as fast as possible . Hiring american workers is viewed as an unwanted necessity now, and only done when nothing else will lete them survive.
Big companies just increase prices and make the collectivist 50% as well as the remaining customers pay the costs.
Small companies dont have the same flexibility and power to just increase prices. Competition puts a definite lid on that approach.
versus the soul-crushing power of jobs where you work full time but still need government support?
So, I suggested WHY NOT set it to $100/hr.
Then everyone would be rich!
He replied "Kirk, are you crazy... People would do stupid things with that kind of money!"
Lefties all believe people are stupid... Because of "cognitive bias", trust me... LOL
How do you get started if the person hiring has to pay $31,000 a year plus $6,000 in healthcare plus 2 weeks vacation to a person who has never worked before?
Without that first job, how do you get experience? connection?
Especially if you have a high school education or less.
You don't.
I have no hope that the "blue" states will think to look at "flyover country" for inspiration, but they should.
As it has before!
And before that! And before that!
And before, before, before----ad infinitum!
Good grief! Now it's happening again!
But that's impossible!
What an unbelievable freaking surprise!
I think minimum wage policies are a tempest in a teapot, though, because after a lot of political grandstanding they usually end up essentially adjusting it for inflation at a level not far for the going rate for entry-level labor. The raise for people at the minimum is not enough to change their life, and businesses that struggle to pay the minimum would struggle in any case.
Even though the minimum wage is not set a level that has much effect, it's a plausible way for people to scapegoat the gov't about why their wages are too low or their business is struggling. That mindset leads to people to look to the gov't to manage their lives instead of feeling like they're responsible for their own lives and for maintaining a gov't. I think this is one reason why the right to bear arms is toward the beginning of the Bill of Right: in addition to being about the right to protect yourself, it's about the*mindset that we the people are the adults, the ones responsible for taking care of business.
Don't give them any ideas. I can imagine business owners complaining that their costs are going up, causing them to get squeezed by competitors who can allocate labor from other departments or use automation, so everyone should have to raise prices equally.
In any case, prices will rise, depending on the fraction of production costs that low-wage labor represents and on the inelasticity of demand for the product.
Probably tine to close up and stop mfg altigether
Yes. That is the side effect of do-goodist governments.
Sometimes, there are ways to survive. Here in Australia the legal minimum wage is very high. Companies cut the work force and put on instead another company to do the work, often offsite. The second smaller company may have more flexibility, and may have sources of labor such as new migrants that are not available to big companies. Some of the new migrants are hungry for work. They think, correctly, that a work record beats welfare. Some small businesses work as a good productive team, often family members, there are a few well known success stories.
Migrants from SE Asia have this built-in work ethic, but (some) Africans as well, knowing where they come from is only a rough guide.
There are bad side effects to that as well, there is a permanent (white and indigenous) underclass, they do not want to work nor can they work, worse, neither can their children. Welfare dependency is built-in and goes from older to newer generations.
I know a factory here that is close to 100% Vietnamese on the factory floor, legal wages are paid, and they compete with Chinese made products.
Assorted thoughts:
- Start using vendors in low-cost regions so you can do some of the longer-turn work there. Your value added would be communicating in English and committing to lead times and specs. Chinese vendors often offer spec sheets in Chinese only, and I wouldn't trust them if I didn't have experience with them.
- Change the process to make it less labor intensive.
- Offer some other service, maybe design, with higher margins to offset margins getting squeezed on mfg.
I had some labor-intensive assembly business at my business for a while. The margins were higher than engineering services, as a percentage, but I couldn't keep a steady stream of assembly business. I sometimes think of what I could have done differently, but I generally happy not to have to think about it because I'm working for someone who, unlike me, is successful at running a business.
The Chinese are getting smarter at marketing. They stock in the USA now through partnerships with large fulfillment houses. We have survived so far through constant new product offerings, but Chinese are very aggressive at catching up. English isn’t a problem for them much anymore. They are still a bit behind on nuances of product features to satisfy USA market but they are catching up. Chinese are now actually more capitalistic than Americans !!
That's a better phrase for it. I don't know a good word or short phrase to convey the responsibility for one's own life resting directly on his shoulders.
I heard an interview with a government official in lame duck administration working hard to pass a regulation before the new administration. The rule was to ban some chemical from hardware stores. It was safe if used according to the warning labels. The official said she scrambled to pass the rule because everything in any store open to the public should be unconditionally safe, not just safe if used as directed. In my mind, that's a rule for little children. As we become adults, we should not need a parent keeping us unconditionally safe. Such a desire is relinquishing your rights. I think about this because I have kids. I want them crossing major roads and using dangerous tools responsibly, as soon as they're ready for the responsibility. I don't want them to go to college and need "adulting" classes or a support fluffy.