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June 16, 2014

Raising Minimum Wage : Will it help us or hurt us?

Filed under: Food for thought for friends — Alec @ 6:32 pm

There has been a lot of discussion about “Minimum Wage” the last month. I have a feeling that it is more emotional than logical.

First, let’s assume that a huge percentage of the “Minimum Wage” people work in the food service industry or agriculture during the high producing seasons. I am sure it changes from major metropolitan area to rural areas in different parts of the country.

Second, the cost of living varies widely form New York City to rural south, so to pay the same “Minimum Wage” may be unreasonable.

Third, let’s assume that 50% of the food service workers are young, under 30. I tried to find employee demographics for McDonalds, but could not. I did find that 70% of McDonald employees are minorities or women, and over 25% of them are in Leadership positions.

Fourth, most agriculture jobs are not full-time annual jobs, most food service jobs are not full-time 40/hrs a week positions. Obamacare took care of eliminating full-time food service jobs. Most food service jobs report a huge turn over i.e. 100% plus a year.

Fifth, I do not know what percentage of food service employees are considered the major bread winner. In some areas, a person earning tips at a decent restaurant can make a decent living, but that is not everyone. In Mexico some of the highest paid people work in the restaurant industry.

Assumptions: I love to hire what I call “Fresh out of McDonalds” employees. If they have a good attitude and a high school diploma, they can make great entry-level employees. I can hire them for $10 to $14 per hour, they are happy with the wage and I can invest some time and money training into them.

Fact #1: A small percentage of “Fresh out of McDonalds” candidates can read and write English at the 8th grade level and do elementary math at 6th grade level. If they can’t, I can’t hire them to run quality parts, follow safety procedures, etc. Some assembly manufacturers can hire non-English speakers and math challenged, but CNC machining companies usually can’t.

Fact #2: I need to hire those $10 to $14 non-skilled employees if I want to remain competitive in the global market. If I can’t hire them, or have to pay a higher wage for the same amount of experience, I have to do the following:

1. Raise my prices and risk losing business

2. Replace a human with an automated machine

3. Outsource the non-skilled parts to Asia or Mexico

All of the above usually result in hiring and maintaining less employees.

Opinion #1: I don’t mind raising the minimum wage to approximately $9. But more than that just causes more unemployment of the least skilled people in the marketplace.

Opinion #2: If we raise the minimum wage to $15 per hour, a lot of my potential employees will take those jobs and bump the people with less education and a reduced skill set. I will probably have to buy automated machines or outsource some work to Asia. The result will be higher unemployment for HS dropouts and people without a trade. In this instance we have to stop thinking locally, and try to think globally. If we raise the minimum wage too much, we may just hurt the people we are trying to help.

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