What Did You Expect?

Let me begin by stating that I am all for working people earning a living wage. That being said, this post is focused on how mandating higher and higher minimum wage levels has consequences that many advocates fail to account for, leaving them shocked and irrationally angry when negative impacts arise. Much like the people blindly pushing for immediate transition to EVs without consideration for where the electricity comes from, no plan for creating the required infrastructure, and no clue about how the precious metals in the batteries are obtained – or disposed of, these folks are blinded to the consequences of mandating increased minimum pay levels.

       To repeat, I fully support workers earning a living wage. The difference between me and those blindly screaming for higher minimum wage laws, is that I understand that when wages go up, prices go up to offset the increased cost as companies are in business to make a profit. Do some take advantage and raise prices more than needed to maintain profit levels? Of course, greed is a factor just as it was during the supposedly Covid-induced supply chain issues when many corporations made record profits by jacking up prices well above the amount their costs increased. One hopes that authorities would intervene when such things happen – but one would be naïve to expect it.

       The latest news out of California got me on this topic. When I heard that Governor Newsom put forth a proclamation that fast food workers are to be paid $20 an hour – while the state minimum wage for all other hourly workers remains $15 – I immediately thought of the consequences.             Higher wages mean higher prices – period. In the fast-food world, higher prices most impact the very people California’s governor is trying to help. Low wage workers may now be priced out of the businesses they work in. And what about those not in that industry who still earn the mandated $15 per hour? Another well-intentioned action with – somehow - unanticipated negative impacts.

        There was shock and outrage when McDonalds and other fast-food chains impacted by the edict announced significant price increases to maintain their profit levels. Sorry folks, but these are not charities, they are profit-based businesses and when costs go up, their prices rise to maintain profit levels. That’s the way business works.

        Another consideration that rarely gets mentioned is that when minimum wage rises, all those making more than that take a pay cut in 2 ways. First, the ratio of their pay to minimum wage decreases and second, prices increase so their buying power decreases. Both of these impact all workers no matter their wage level.

        I don’t pretend to have the answers to the dilemma of how to balance minimum wage levels, but I do know many of the questions to ask when contemplating such issues. Perhaps indexing for cost of living by region rather than nationally or state-wide. That would certainly help those in higher cost areas, though prices will still rise to cover increased costs, so it’s not the perfect solution, but it could be a start.

        My point here is that when addressing complex issues such as minimum wage rates or EV mandates, we need to take a step back to identify all stakeholders and all the connections and ramifications of potential actions. That is the only way to accurately calculate the benefits and costs to find the right balance and implement the best solution.

www.RetiredandInspiredat55.com  11-13-2023