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I have two related stories, one of which I have been sitting on for a while. The first is: The Results of a Seattle Suburb’s Minimum Wage Hike Deserve a Big Fat ‘We Told You So’ and the other one is: Seattle Businesses to Fight $15 an Hour Minimum Wage. The first article lists these points:

  • Managers have taken more responsibilities on themselves, instead of hiring more workers.
  • Businesses have laid off workers, or eliminated their plans to hire more.
  • Area parking now comes with an added “living-wage surcharge.”
  • Hotels have cut employee benefits, free food, and overtime

Hiring has dropped to negative numbers (nobody is hiring, some are letting people go), benefits are cut and prices are going up. I really don't see a problem here, this is what Liberals do, destroy the economy in the name of "helping the people," which ends up causing them more grief.

The second article talks about a consortium of business to "modify" the $15 minimum wage back to a relatively less-painful $12.50 an hour. They interviewed a bar owner, who gives some hard numbers on his situation: He operates on a net profit (that's what's left after all expenses have been paid) of about 5%. If you do the math, his business would have to make $1,000,000 in gross sales for him to make the national average of $50,000. His labor costs run around 30%, and if the $12.50/hour goes into effect, his labor costs will go up to 40%. Now, the businesses that supply him with goods and services are going to take that same hit, so his non-labor costs will probably jump about 10% as well. His expenses just jumped 20% and he's working on a 5% margin. What do you think his prices are going to do? Go up, of course. The business owner will have to pray that he keeps the same level of sales, or he will have to cut that labor cost by letting people go.

Here's something a lot of people don't know, outside of HR, Payroll and Small Business Owners. The true tax rate for Social Security/Medicare is not the 7.65% that you see come out of your paycheck, it's actually 15.3%. The employer "pays" half of that as part of his administrative costs. So a worker who is paid $8.00/hour, it actually costs the employer $8.61/hour. If the business has to pay that worker $15/hour, it now becomes $16.15. That is a difference of $1,123 per full-time employee per year. So, let's say you have a business that employs ten full-time employees (or twenty part-time) at $8.00/hr. If the minimum wage goes from $8 to $15.00/hour, total labor costs will jump from $179088 to $335920, a difference of $156,832 a year.

At $1 million annual gross sales, and a 5% profit, you just went from profiting $50,000 to losing $106,000 a year. To stay the same, your prices will have to go up 16% and you hope your sales don't go down, or you have to cut 25% of your workforce. Those are glorious choices, aren't they? That's the reason for the title of this post. Raising the minimum wage will be like a 300 lb person doing a cannonball into a kiddie pool. The person makes a big splash that will force most of the water out of the pool, and when they leave, there will be only a little bit of water left. If this $15 goes into effect, I'm moderately sure in 10 years Sea-Tac (Seattle-Tacoma) will look like Detroit does today, economically depressed because there are no jobs.


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