California is raising its minimum wage to $10 an hour.
Presently, it is $8 an hour.
If a store owner has three part-time employees who are paid minimum wage, and let us say each worker shows up 24 hours a week, the net pay roll goes from $576 per week to $720. Not a big deal, right?
Liberals dont think so.
Until you realize that payroll has increased by 20%. That is an important number in business.
A business that makes a 20% profit stays open another year. A store that makes a 19% profit may survive but will not grow. A business that makes a 16% profit slowly goes broke.
20% is the threshold for success for many businesses, especially small ones in which there is little room for overhead. Food eateries, gas stations, grocery stores, and so on, have very little room for overage.
Larger businesses buy in huge amounts and can command better prices. Smaller businesses buy supplies in smaller amounts and do not enjoy large discounts from distributors. As a result, a 20% profit is a clear goal for survival.
Not surprisingly, small businesses tolerate very little overhead. As a result, most hire part-time workers to meet labor needs.
Here is another number. Payroll should be between 30-35% of gross sales. If this employer has three part-time workers it is because he cannot afford a fourth. A small business cannot survive for long if his payroll is 35-40% of gross sales.
If we raise his payroll by 20%, and he is already at 30% of gross sales, what happens?
20% more of 30% is 36%. What happens to the business?
Anybody guess? Because the California legislature apparently could not answer this question.
Businesses in California have three options:
- Close down. Many will, creating unemployment.
- Lose help. In order to respond to a 20% hike in payroll, businesses with a larger amount of minimum wage employees will terminate 20% of them.
- Hike prices. Most will do this, at least initially. Californians will see corresponding increases in gas, groceries, fast food, and other businesses who use minimum wage employees. The effects will be obvious and immediate.
Who gets hurt worst?
Anybody care to guess? Because, again, the California legislature could not. But you guessed right: the minimum wage employees! Some will lose jobs and be unable to find work quickly again because businesses will still be reeling from the impact.
But all of them will be hurt by dramatic increases in prices. In fact, if businesses raise their prices the absolute minimum to compensate for the payroll increase, the whole thing will even out.
That means simply this: the cost of living will increase by exactly the same amount that their paychecks increased. So while millions of minimum-wage earners are celebrating their 20% raise, they will find it buys them precisely nothing more.
Know what we call a liberal progressive who understands business 101? A former liberal progressive.
The world works on a cause = consequences-based system. Sometimes, consequences are easily foreseen. This will be one of them.
Say, as an alternative, what about this crazy scheme: what if businesses paid their employees whatever the owner felt they were worth? Some places pay $12 an hour, some $8 an hour, and some places only pay their workers $3 an hour.
If you dont want to earn $3 an hour…follow us carefully here…you dont work there. Either the owner gets enough dumb kids to cover, or he winds up unable to staff his store. He either goes out of business (good), or wisens up and pays his workers more (better).
Some of us might frankly have to take that $3 an hour job because we are morons. Some may take it only until something better comes along. The rest of us simply walk out of the interview and apply somewhere that pays better.
The end result is that well-run businesses that pay more become very successful with good employee retention. Places that pay badly are run out of business and the owners wind up working for someone else to learn how its done.
Is this so freaking hard for Californians to understand?
Check the headlinesyes, it apparently is.
Божію Поспѣшествующею Милостію Мы, Дима Грозный Императоръ и Самодержецъ Всероссiйскiй, цѣсарь Московскiй. The Czar was born in the steppes of Russia in 1267, and was cheated out of total control of all Russia upon the death of Boris Mikhailovich, who replaced Alexander Yaroslav Nevsky in 1263. However, in 1283, our Czar was passed over due to a clerical error and the rule of all Russia went to his second cousin Daniil (Даниил Александрович), whom Czar still resents. As a half-hearted apology, the Czar was awarded control over Muscovy, inconveniently located 5,000 miles away just outside Chicago. He now spends his time seething about this and writing about other stuff that bothers him.