Minimum Wage, more money in your pocket but more money needed to buy; no gain and more pain.

Most business owners understand that the minimum wage hike will definitely hurt the economy; but a small few don’t see the ripple effect which will spread across the entire economy. They feel that since they already pay over what the minimum would be that they are “safe”. I spoke to one owner who today said that he would welcome having his (and he mentioned a major chain) competitor having to pay the same or higher wage as he does for his employees.

These few employers like him which exist perhaps haven’t considered how a “one size fits all” wage increase program's impact would be on not only their business but even the well being of their own already highly paid employees.  

From a lower paid employee’s outlook, he or she thinks that at this time they cannot “afford” things because they are not getting paid enough (and they listen to and believe all of the banter by well-intentioned politicians who never held a job or ran a business). They believe that if only they got paid more they would have more and could buy more. Seems simple enough. They do not understand that yes, they will indeed have more money but that money will buy less because the prices on everything will go up too.

If the minimum wage increase went into effect tomorrow this employee with a higher paycheck had better run to the store as fast as his feet can carry him before the store owner raises all the prices to cover giving his overhead. (Overhead is a term employees, politicians and a lot of people on the street don’t know the meaning of). 

People now working two jobs to make ends meet will still work those two, and perhaps three jobs, to pay for the same things they buy now.  The prices of everything goes up in relation to what their new paycheck equals. Wages go up and prices go up; you have more money in your pocket (but it buys less).

When I speak to a business owner like this rarity who hasn’t yet realize how the ripple effect of what the minimum wage hike will do, I applaud them for their choice as a business owner to pay whatever they want, to attract and keep good employees (which is a topic for another time). However, an across the board minimum wage hike will also increase the cost of goods coming into his place of business; which in turn causes him to have to raise the cost of his goods going out his door. He may have to also let employees go to make up for the loss of profit. Then he has to hope the higher price tag on his things are still attractive to his customer so they continue buying and he can stay in business.

Employees pay will be equal and may result in asking for a raise over what they are paid now so they can afford the same level of lifestyle they had been living. Or they may find it more attractive to work at another business which which offers things that wages can't "buy" like flexibility and location closer to home; or doesn’t require working as hard as they currently do, but at the same wage.

There are solutions to help people be able to afford a better lifestyle but a one sized government program, according to most business owners, isn’t it.  

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I recently saw this on Facebook and since it's 

related to this topic, I thought I'd share it here. 

These are the comments which followed... 

Except in many small business that give their employees raises due to the tax savings. But hey...believe what you want!

Life is all about choices , I’ve worked the corporate lifestyle ,I was just a number , I was disposable , I was unemployed for 2 years , March 1 I open my 2nd store! I can’t provide benefits, but I do pay good wages for those who work , some people would rather punch a clock , and leave work at 5pm with no worries , some people don’t want the stress or pressure of a small business .

The 1% does not "get all" the money, they earned their money. People that have money invest in businesses in one many different ways. It could be investing in businesses they created. It could be providing capital for other businesses to grow and succeed. It could be purchasing a product or service from another business. There are many other examples. Many people would be worse off without the success of higher income earners trickling down to them.

And here is my 3 Cents: 

NFIB was able to get the 20% tax deduction for small businesses (it was only going to go to the C corps and up) which has helped the small business owner to give raises to their employees; in some cases over what the proposed minimum wage would do. I really appreciate what Ken, Jonathan and Dave are all saying. Here's an article I wrote which was published about the minimum wage issues which addresses this topic partly. Let me know what you think.

What say you? Please leave your comments below.