How Forcing Companies To Pay $15/hr. Hurts The Poor

A Living Wage is a fallacy, a falsehood and can never help the poor. In fact, it harms them.

I took law courses as well as my opponent, but what he doesn't know is product development and how companies function. He has never owned or operated a business which is what state government regulates. He has ZERO experience and little knowledge of economics. Allow me to explain:

When you work for a company, say you are paid $12 to bake bread loaves. You want a raise to $15. The owner says they cannot afford it. Remember, your needs and desires are balanced against the entire company's balance sheet, every other employee, and every competitor they have in the marketplace. 

When the government steps in, as they have in Venezuela, and says you must raise salaries, companies must comply. In Venezuela 40% of all business closed overnight when salary hikes were enforced. Unemployment skyrocketed.

Here is what would happen in the North Carolina:

1. Companies would have to look at the costs of their products. They still have the same costs for materials, transportation, etc. They might be able to cut their marketing budget, or slotting fees to grocery stores, but that would mean less awareness and possibly fewer sales which would translate to layoffs. Companies need stability to be able to predict their production quantities and project sales. Throwing a wage hike into their planning destroys it entirely. It causes chaos.

2. Companies have a choice to make. They can lower the quality of their product, raise the wholesale pricing, or reduce labor costs in other ways. Say there are five employees in your department each earning $12 per hour. The company must now pay $15 per hour. That means one person loses their job in order to balance costs. This must happen. Further, there would be no overtime, and others would have hours cut to make up the balance of the hourly loss. 

3. If they don't affect labor, they must raise prices. This means they cannot compete as well with any foreign products. While this might not affect bread, think about everything North Carolina produces that could be affected. That means consumers will have to choose between higher priced domestic goods and cheaper out-of-state products or even foreign goods which have no forced minimum wage. So the company raises their price and sees sales drop. This creates a cycle of further retrenchment. More layoffs. Less people buy the products made here. 

We have all seen this happen before. When taxes, stability, price or wage controls are forced to increase, companies react by reducing product lines, reducing labor forces, or, if possible, leaving the state, or nation.

4. So how does this hurt the poor? So a few people get laid off. So what? One, it is not a few people. A 35% pay increase means a 35% adjustment in labor costs, reduced benefits, elimination of health insurance, no vision, no dental, less of everything a company can pay its workers. In the case of employees who are paid $10 per hour it is worse. A 50% pay increase means 50% must get laid off. A wage hike means massive layoffs. To those still employed they do not even have a living wage. Remember, every company will be affected. Every product will go up in price or labor forces will be cut. What there is to buy will become more expensive as labor forces shrink. Fewer sales means layoffs in management, in other departments. High salary positions will also disappear. Manufacturing and lucrative jobs will again LEAVE THE STATE for states that have no forced wages.

Here's the worst part. People receiving benefits, welfare, and food stamps are faced with higher prices on many products. They were not working. They received no living wage increase. Their dollar buying power is LESS. Poor people get hurt, and young people will find no work. There will literally be over 90% unemployment in the youth sector because all entry level positions have been phased out. Companies paying $15 per hour must justify the hourly wage by increased production and value from employees. Sixteen to twenty-one year-olds that are not critical to operations will not find jobs. At all.

5. The consumer cycle of our economy will fail. This has been tried in other countries and it has had the same result. Business collapses. 

If you want to earn more we need to drive business forward and increase growth. As more millions of jobs are created there is a natural competition for workers. We are seeing private companies start to raise wages now because good workers are becoming scarcer. This process will continue unabated right now. In the US there are over six million unfilled positions. Many need trade or other training.

The best advice to those who want to earn more is find out what jobs in your area are going unfilled and target them. Get to community college or trade school and learn what you need to start working semi-skilled, and skilled positions that exist currently. Don't expect government to artificially raise your wages. It doesn't work, and it only hurts the most vulnerable. And in the process creates more poor people who have no jobs.

It was bad enough when we saw bread rise in price from a dollar a loaf to $2.40 and $3.00. If government dictates a $15 per hour wage get ready for a bread loaf costing $6.

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