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The Real Minimum Wage is ZERO: How to Think Productively About Pay

If I am to judge by our government, our media outlets, and by the American people’s voting habits, America is suffering from a horrible condition known as stupidity.

Stupidity is not a lack of facts, for we have never had a greater capacity to garner facts if we want them. Just ask any room full of high school or college kids any question and they can Google an answer in seconds. They will also mistake this capacity for knowledge.

Stupidity is about a dullness of mind and a general inability to use facts to arrive at truth.

This stupidity is cultivated by people with keen intellectual powers if one judges such things by mathematical type measures… Yes, by people with a strong capacity for a certain kind of logical process. These people can be educated and technically intelligent and still be stupid because their keen logical process begins from a position of foolishness. When the first brick is mislaid the rest of the wall gets worse with every course.

And so, while I primarily design to write to help people read their Bibles better, I find myself trying to help people think better about other things too… and I find of late with every visit to social media, or any media outlet, that I feel like I’ve accidentally been transported into someone else’s LSD fueled nightmare where all sense is perverted into outrageous shapes.

Fast-food worker Michelle Osborn, 23, of Flint, Mich. shouts out chants as she and a few dozen others strike outside of a McDonald’s restaurant on Wednesday, July 31, 2013 in Flint. A few thousand fast-food workers in seven cities took to the streets demanding better pay, the right to unionize and a more than doubling of the federal minimum hourly wage from $7.25 to $15. (AP Photo/The Flint Journal, Jake May)

Today’s provocation was the news that in states where new minimum wage laws have been passed, McDonald’s is replacing thousands of workers with machines. People are shocked. How could they do this? How could this happen? We pass a law meant to help the poor and it ends up hurting the poor.

Say it isn’t so, Joe, say it isn’t so!!!

People who know how the real world works could have told you that massive loss of jobs would follow massive increases in minimum wage… in fact they did tell you, but people who work these kinds of jobs don’t understand economics, and politicians who want their votes need to look like they are trying to help even if they make the situation worse.

No worries. Their constituency will never connect the dots and blame the helpful politician for the backlash… it’s the fault of those greedy corporations who want to stay in business.

So why does this always happen when minimum wage is increased by the government??? And it does always happen when people demand more money than they produce for those who employ them. One article I read said it best, “…when you demand to be paid more than you are worth, bad things happen to you. ”[1]

Economics work a certain way… not like a culture works a certain way, given that cultures are fluid… NO! Economics works a certain way like gravity works a certain way, like chemistry works a certain way, like biology works a certain way.

While national and global economic systems are highly complex organisms there are some basic principles that a wise person remembers.

  1. People buy less of a thing at a higher cost and more of a thing at a lower cost… including people’s labor.
  2. There is a delicate balance between what one is able to earn FROM an employer and what one is able to produce FOR an employer. Workers pay is only meant to be a part of what they are able to produce on the job.
  3. Pay is not determined by NEED, but by productivity.
  4. If a worker demands more pay than they can produce, an employer must either be willing to absorb the loss, or dismiss the worker altogether.
  5. If the government demands more pay than workers can produce, an employer must either be able to absorb the loss, raise prices on the products or services they offer (which also causes serious risk of business loss… remember, rule #1), dismiss workers, or go out of business dismissing ALL workers.
  6. Minimum wage laws are the starting point at which the Government will allow you to begin earning income… even if YOU think some is better than NONE. Minimum wage laws are the government’s interference in your ability to negotiate the pay for which you will and won’t work.
  7. Minimum wage laws raise the bar on the amount that a person has to produce before he or she can begin to earn income. Thus, unskilled and largely unproductive workers have fewer opportunities to gain skills on the job… it is too expensive to train them.
  8. The real minimum wage is ZERO, and minimum wage laws do nothing but increase the number of people who will collect ZERO, because their productivity levels must be so much higher to make it profitable to hire them.

So what have we learned, if one is willing to consider these facts? …and they are facts.

Don’t be emotional about what you wish the world was like. Pay isn’t based on need.

Instead, learn wisdom and deal with what the world really is like.

  • Why should any worker be paid more money than they can save or produce for their employer by working? “The Rent won’t wait” isn’t a reason for you to get paid more than you produce.
  • Why should an undereducated, unskilled, unproductive worker expect a “living wage” that outstrips his or her output?
  • Define “living income” when most homes are dependent on a double income.
  • Who says how many hours a week a person should work, or how many people in a home should work in tandem to provide a “living income”?
  • What is a minimal standard of living? Who decides?
  • What does $7.25 won’t keep my family alive even mean in real world economics? Get a higher paying job. Work more hours. Live in tandem with others to live cheaper. Cut costs by living smarter.

For the sake of argument, let’s consider the McDonald’s burger flipper and what is involved in dictating his or her pay.

Some people think that a person who flips burgers for McDonald “deserves” to make a “living wage.” Let’s consider this for a second.

What would this person have to do to make the new minimum wage if they did this for themselves?

They would have to rent property, set up equipment, get insurance, buy the paraphernalia like menus, napkins, cups, etc…, purchase the goods needed to make the burgers. Then they would have to open their shop or stand in a good location, and advertise in one way or another to get customers coming in. They would have to sell their product for just the right price so that they could make a profit without driving away the customers by asking too much… indeed they would have to compete in pricing with lots of competitors, not the least of which is their would-be-customer’s home grill or stove top. Then they would have to work making burgers delicious and fast and sell a certain number of them to earn their “minimum wage” after paying off all the costs of doing business. They would have to have book-keeping skills and money management skills and be skilled in shopping for the best prices and best goods. They would have to have the right kind of public presence and meet health code standards.

How many hours would they have to work? How many non-burger flipping hours would they have to put in? How many more hamburgers would they have to sell to compensate themselves for those hours, too?

Well, guess what? McDonalds has to do all those things for their burger flippers. McDonalds has to pay for all these things and more. McDonalds has to pay other people to cover all these needs and then has to earn this money back from the number of burgers and fries and other items that the burger flipper can produce and sell per hour at a competitive price that keeps the customer count high.

Does your average burger flipper really DESERVE $15 an hour, just because he WISHES he could get paid that much to do the job?

[1] http://wizbangblog.com/2015/06/01/mcdonalds-workers-replaced-by-these-machines-thanks-to-minimum-wage-increase-nice-job-dems/

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