Thursday, February 14, 2013

Raising the minimum wage a mistake!

If people were willing to work for a little less money, a great number of jobs would be created, these jobs are needed at a time that many Americans claim they have been looking for employment and will do almost anything for work. Unemployment remains high, yet the President wants to raise the minimum wage. So what gives? How do we reconcile these strange reports? This is my take on this phenomena, it could be called a "tale of two cultures." It could be that the crux of the employment problem, is cultural and structural in nature. It may be based on unrealistic expectations created over the last decade by our growing government centered economy. Government employees are often paid better then in the private sector because government does not need to make money to exist.

Raising the minimum wage will make America less competitive and give employers less incentive to hire. As a employer I was surprised several months ago at the difficulty I had finding qualified workers during a small construction job that lasted several months.Yes, I could have hired a company to do various parts of the work, but I would of lost much of the control over the many decisions that had to be made as the project progressed and took form. Workers that had lost jobs paying far more often proved slow, sloppy, or allowed personal problems to keep them from showing up for work. I have several thoughts that formed during this experience.

I'm reminded of a story I heard years ago about a man who sat down in front of a empty fireplace and said "warm me and then I will put wood upon you", but life does not work that way, and neither does the job market. Many people forget it is not just the hourly wage we must look at,  but the hidden cost of hiring must be factored in, such as the cost of training and all the liabilities of being responsible for their actions. Now add to that wasted time, risk, insurance, and more taxes. After a worker takes a job, proven their skills, shown they are reliable, and that they are indeed an asset, only then are they be entitled to more rewards.

Big box stores, fast food franchises, and hotels often pay minimum wage, while other small businesses are asked to be more generous. The difference in wages is often because many small businesses need more from an employee. They must invest more in time, energy, and training, they are hurt when employees leave. The fact is when people work in an environment where they must show more then minimum responsibility, and make even minor decisions, the mistakes and errors they make can be very expensive, and can make the cost of the worker far more then he or she is worth.

Raising the minimum wage would be another strong negative to hiring. Remember in a small business the owner or manager has to deal with the employee directly, this ties up their valuable time. Large companies often have departments or discipline channels that serve in the role of  "babysitter." Most employees generally do not recognize the cost of their working with constant cell phone interruptions, logging in on Facebook, shopping online, repeatedly plugging up a toilet, stopping to buy cigarettes, or the habit of always rushing off to use the restroom while a truck full of paid workers wait to leave for a job.

In the end I suspect the employers will win out and lower wages will become the norm for the coming decade, the alternative is people will just continue not to work. Like many employers I have become skeptical, of the benefit of adding staff in the current environment. I have been told many times by job seekers of their outstanding skills to later be disappointed. It is easier to brag and talk a good game then actually produce results. Bottom line is that till this discrepancy is resolved do not be surprised if many businesses chooses to pass on more hiring. Yes many people will do anything for a job, but it seems, they won't do that! By "that" I mean, do enough productive work that their employer actually "makes money" and profits from their labor.

Footnote; For more on the effect of long term unemployment on society and our culture see the posts below, comments are welcome and encouraged,

1 comment:

  1. Dear Bruce, Thanks for sharing your opinion, and inviting responses. I had just finished a lengthy response when I accidentally hit a wrong key. I hope that you received it, nonetheless, because the time and difficulty of reproducing it are beyond my justification of the effort. Briefly, your arguments seem plausible and almost believable, but your analysis is missing some key critical points. Maybe I will find time in the future to give it another try. James