Friday, January 25, 2008

Gas Prices and the Minimum Wage

You and I, and everyone I know, takes home a paycheck every week (or two). We "make ends meet" with that paycheck we get versus the week's groceries and gas, the kid's clothes, the monthly rent (or house mortgage) payment, taxes, etc. We're on a budget.

So, what happens when some bozo large company, say Exxon, decides to raise prices at the gas pump? Well, unfortunately for Exxon, there are other gas stations. So, we shop around for a lower gas price.

Ah, but what happens if the Chinese economy starts booming and they bid up the price of oil, so that *all* the gas station prices go up? Well, unfortunately for us, we find a way to drive less. We *have* to get to work. We *have* to get the kids to school. We *have* to get the groceries. So we plan and scrimp and cut back on nice-to-have driving -- because we have to "make ends meet".

We'd do the same thing, scrimp and cut back, if the price went up of some other commodity we use on a daily basis -- say coffee, or milk.

Mom & Pop stores are just like us; after all, they are run by a mom and pop. Their store also has a budget. They have things to buy, and they pay rent, they pay taxes and fees (more often and to more agencies); and if they're lucky and their business doesn't go under, they get to take home a profit paycheck each week (or two).

So, what happens when some bozo large government, say ours, decides to raise prices for employing some people. That's what the Minimum Wage does; it raises the price for employing the least-capable and least-trained people. Well, Mom & Pop have a budget, so they have to scrimp and cut back -- on the least-capable employees. You didn't really think that they would cheerfully continue to employ those least-capable people, did you; and go broke doing it? They aren't running a store to go broke -- they are running it so that they don't have to work for somebody else. (There are people like that -- they want to be their own boss.)

So, what do they do? They lay off a least-capable employee, to pay for the Minimum Wage price raise that the government forces them to pay to the remaining least-capable employees. And then everyone has to work harder to get all the work done, especially the least-capable employees. After all, they've just seen one of their peers laid off, and they could be next.

Now, there are 10 times more Mom & Pop stores (some of which are gas stations), with 20 employees or less, than businesses with 100 people. And there are 10 times more 200-person businesses than companies with 1000 people. And there are only a few large companies, like Exxon, with tens of thousands of employees -- and the vast majority of those are not least-capable and least-trained considering they usually have a college diploma.

What this means is that it is the Mom & Pop stores that employ the vast majority of the pool of least-capable employees, the ones being paid Minimum Wage.

And what that means is that when the law makers raise the Minimum Wage, they increase Unemployment. Just like one and one make two; raising the Minimum Wage puts people out of work and onto welfare.

Yikes! If it puts more people on welfare, they'd better raise taxes to pay for 'em while they're at it.


  1. If it didn't wreck so many lives, it would be delicious irony that the people who so loudly lament the lack of employment opportunities for "at risk" youth are also those clammering for a higher minimum wage, which, in effect, prices them out of the job market.

  2. Very true. Very sad for the H.S. grads.

  3. Forwarded this to a friend of mine. She said "OMG! The emperor is naked and this guy has opened his mouth and is talking about it!"

    One of the best explanations of this I've very seen! Ought to be required reading.


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