Living Wages

A “living wage.” Exactly what does that statement mean? Is a “living wage” something for which you build a little house in your backyard and put out a bowl of food and water to feed?

Activists and politicians love to talk about a “living wage.” It makes good newspaper headlines. The concept seems to basically involve the government telling the owner of a business how much to pay his employees, rather than letting the free market make that determination. Well isn’t that special, I know all of those business owners will appreciate the assistance…not!

So let me see if I have this straight. I go out and borrow $200,000 from the bank, put up $100,000 of my own money, rent a building on a small parcel of land, buy equipment, raw materials, and hire 20 employees (sales, administrative, and manufacturing) in order to produce and sell my own brand of widgets. Happily, sales are booming…and I need a vacation after working my rear end off over the past five years building the business.

But along comes the government, with a gun and arrest powers, and they have some different ideas about how I should spend my time and what I should do with MY money.

I already have to handle the withholding of payroll taxes (income, FICA, FUTA, social security) from my employees, and collect sales taxes for my state and local governments. To do all of the resulting financial paperwork, I have to hire an accounting firm and a couple of bookkeepers and pay at least fifty or sixty thousand dollars annually for their services.

Then, if I actually have money left over after paying for the building, my employees, raw materials, and my accountants, then I have to pony up between 20% and 36% of the company’s net profit in the form of taxes to the federal and state government to pay “my fair share.” Boy, am I glad that that is over with. And, by the way, we didn’t mention the cost of group health insurance yet, did we?

But wait a minute, there is another problem that the government is going to step in and help me fix. Now I need to pay a living wage. It seems that I don’t pay enough in wages to some of my twenty employees I hired after spending three weeks interviewing the 150 applicants I got from the $100 newspaper ad I ran in the local paper. So now the government will ride to the rescue and tell me how much I need to pay. Boy, am I ever relieved.

The media loves to report stories about how it is impossible to support a family of three or four on one 40 hour a week job paying minimum wage, which happens to be $5.15 per hour in most states. As a result, we are told, people are unfairly forced to work more than forty hours or worse, forced to work more than one job in order to “make ends meet.” Where is my box of tissues…sob, sob.

What is not reported is the FACT that most if not all of the jobs paying minimum wage are ENTRY LEVEL. Who in their right mind expects to work to retirement age in a position paying minimum wage? Most of the people working in these jobs are teenagers or twenty something’s that spend a few months or at most a year at that compensation level on their way up the job ladder. If they don’t move up, something is seriously wrong with the employee and/or their education. Of course there are always the obvious sob stories about the high school drop-out, single mother of three who can't afford daycare and can't afford the time to go back to school while working two minimum wage jobs. What was she thinking to get herself and her family in that situation? That's the problem, she and thousands like her aren't thinking--and now they want the government to solve their problem by artificailly forcing wages upward.

A total of twelve states have already taken it upon themselves to force employers to pay minimum wages in excess of the federal rate. For instance, the State of California has imposed a $6.75 minimum, with a special rate of $8.50 for the City of San Francisco, with sometimes devastating results. Within months of this wage minimum being imposed, San Francisco based Chevy’s, the company that owned the Tex/Mex restaurant chain Rio Bravo that operated here in Georgia, filed for Chapter 11 bankruptcy and closed all 26 Rio Bravo Restaurants. It’s sort of hard to profitably run a restaurant paying $8.50 an hour when your competitors are paying $3.25 plus tips. It seems that California tries to force firms based in their state to pay the mandated minimum wage on all jobs regardless of where the employee is located. The long arm of the law just keeps getting longer.

In my opinion, what is at the heart of the “living wage” controversy and resulting higher minimum wage push is an obvious culprit. While it is usually disguised as a humanitarian effort, the reality is that union pay scales are directly tied to the local minimum wage, something that the labor unions and the Democrats don’t want you to know about. If the minimum wage goes up, union labor rates automatically go up across the board, without having to re-negotiate the existing labor contract!

More on this topic later...


UPDATE October 14, 2004 5:30 AM

Who is paid minimum wage? This says it better than I ever could. Read it!