The Problem With Raising the Minimum Wage
Posted by David Chism | Wed, Oct 21, 2015
This post was inspired by the most recent debates about raising the minimum wage in our country to $15 an hour. I think both liberals and conservatives, who are not as familiar with small business, might just be in favor of raising the wage. I think I know why! This is just my theory, they have (in many cases) not had the opportunity to run a small business, especially a contracting business. They also show compassion for those making very little money, and I applaud them for wanting to see people make more money and have a future! It is good for citizens to care for those who are less fortunate. Yet, it is my personal belief that by mandating a minimum wage increase into law would only do more harm than good in the long run both for the economy and for many of the people getting the increase in pay. So this post is to my left or right leaning friends who might think raising the minimum wage is a good thing for the country. In theory, I like the idea of everyone making more money! I like the idea of starting at $15 an hour. I am no fan of employers who take advantage of their employees and underpay them. It happens all the time. These are the horrible business owners that are making the minimum wage an issue today. These people give capitalism a bad rap and push Americans to think about introducing more socialism into our system. Diving right in here, the problem with increasing the minimum wage is that this system really does not work in a free market. In an ideal free market world, with both a motivated employee and a decent employer, the employee should be paid a starting wage that fits his/her skill level. The employer wants an employee who will commit himself to working hard and being part of the team. The employee, after showing progress, should begin to receive regular reviews and raises based on his level of expertise in that line of work. If the employer really wants great employees, he/she needs to provide a great place to work and care for his employees. And in a free market, the employee is free to leave and seek another place of employment if his employer is not treating him fair or he wants to earn more money. I understand that in some industries and cities around the U.S., this is not so easy for some workers to do: leave and find another place of employment. Yet, a person still has that right.
The Effect on Consumers Who Seek Home Improvement
If we raise the minimum wage, it could drastically hurt many industries, especially the small service businesses. It will also affect the consumer! Think about it this way: if a painter is making $10 an hour (a typical starting wage for an apprentice), he will now be making $15 an hour. So far so good, right? Normally a painter making $15 an hour has worked his way up the ranks to get $15 an hour. This can happen in as little as 2 – 3 years in most cases. This employee will see the apprentice starting at $15 and he will want $20 an hour. Seems fair to me! You see where I am going with this. The foreman running the painting project making $22 – 25 probably spent 8 – 10 years to get up to that hourly wage. Now he/she will want $27 – 30 an hour. Raising the minimum wage sounds fine if everyone gets a raise. Yet in order to do this, the business owner will have to raise the rates to his customers. So let’s say, to paint the exterior of a house costs $4,200 with an apprentice and one foreman (crew leader). If everyone got a $5 an hour raise, the cost could be around $5,400 including the extra overhead. The real problem is, I do not think customers will like such an increase in getting services completed at their home or place of work. Therefore, it will hurt the small businesses because they will just have to charge the same price to a client and take a loss. Taking that big of a hit in selling services could just backfire all together and cause businesses to lack the profits to stay in business and begin laying people off. What Can Workers Do?
A Nanny Job Example
My wife’s youngest sister recently approached me about a nanny job she was doing. She wanted my opinion on what to do. She had asked for $15 an hour to start. Long story short, the couple would not pay her more than $10 an hour. If you knew my sister-in-law, she is worth $15 an hour, yet she took the job because it was steady employment, and she was just being nice. I think she felt that at some point in time, she’d quickly show them she was worth $12 or even better, $15 an hour. That day has still not happened. On top of that, the couple thought they recently overpaid her by $10 and wanted the $10 back. When I heard everything that was going on between my sister-in-law and this “cheap” couple, my advice was to begin looking for a better place to work. I think she can afford to do this because the economy is strong enough that she will find a better position. She should not let people like this “lord over her.” Again, this is why we are having the debate about raising the minimum wage! I also believe by leaving this nanny position, she will send a message to this family who hired her that they cannot underpay people and get away with it. What Should Employers Do?
An Example From My Dad
Those who follow my blog know I like to brag about my father, Mike Chism. He is one of my heroes! He runs a small painting company (Chism Brothers Painting) in San Diego and provides a great place to work. He cares about his employees more than making large profits. If he ever finds out that one of his employees is struggling financially or needs help, he will quickly come to the rescue. Sometimes, he will give the employee a raise or just help financially. He does this because he is neither embracing capitalism or socialism. His Christian belief is to show kindness and respect to his fellow man. So this post is my random thoughts on the issue of minimum wage. I do not mean to offend anyone or take political sides. I just hope that small business owners will begin to take care of their employees because it is the right thing to do and not because the government dictates how to run a business.
About David Chism
David Chism started his business out of a passion for helping small contracting businesses grow, be more profitable and become better known to their target clients. One lifelong hobby of David is using techie gadgets. So this blog is a place where he writes about technology, marketing ideas, just for fun (humor), personal thoughts on small business and more.