Wednesday, January 18, 2017

Minimum wage legislation will decrease jobs (in the long run)

I don't work my best when someone tells me to do something. 
I don't like authority for authority's sake.

I willingly listen to smart people. I'll take their advice and apply back to my life and business.
But when someone says I have to do it, I try to figure out a way not to do it.

This behaviour has repeated on countless occasions to with parents, teachers, bosses, business partners, co-workers, my spouse, my kids, friends, and even government.

That's my crazy.

Conversations recently circled around minimum wage legislation. And why it was time for a dramatic raise for our less fortunate working class to increase their standards of living. 

I grew up in a poor household, so I know how that feels. I went to school with butter sandwiches that mom bought on credit at the convenience store.  I believe poverty is not a financial condition. It's a mental one. 

That's just me. 

Listening to the arguments for and against the minimum wage debate, something occurred to me. 


"When cigarette prices increase, more people quit. And subsequent demand for it shrinks!" 

And

"When a business wants to sell more of something, they put it on sale. And demand rises."


If this theory is correct, then as labour costs continue to rise, more buyers of labour (employers), find other alternatives through foreign workforce, automation, downsizing, and closures. 

The argument is not about greedy corporations. It's economic theory.

Here's what Jeffy had to say:

“I very frequently get the question: 'What's going to change in the next 10 years?' And that is a very interesting question; it's a very common one. I almost never get the question: 'What's not going to change in the next 10 years?' And I submit to you that that second question is actually the more important of the two -- because you can build a business strategy around the things that are stable in time. ...  we know that customers want low prices, and I know that's going to be true 10 years from now. They want fast delivery; they want vast selection."

If you believe Jeffy is correct, then we can expect corporations to find a way to give customers low prices. Labour costs are considered material costs in almost every industry in North America. As wages increase, so do consumables. 

The general public doesn't want prices to go up. Jeffy doesn't think so and neither do I.  If anything we want them to come down.

Manufacturing jobs left North America when those same jobs were a fraction of the price in Mexico and Asia. Other manufacturers figured out how to automate their plants, thus reducing workforce and remaining competitive.

Businesses are based on outputs and inputs. The employee who says pay me more money and I'll work harder has his pants on fire. 

Profits are marginal today in most retail businesses. The internet has helped marginalize them even more. Those jobs aren't in jeopardy, they are on the most endangered list. 

One friend owns a well respected pizza shop. He told me that he has a pizza special that has increased in price by $1.00 in 12 years. Considering labour increases, food prices and energy costs, it's certain his profit margin has shrunk on that special.

I don't like being told what to do. Force me to pay more for a labour hour and I'll figure out how to pay less through some other means. That's business and a thing called a "free market". 

Jeffy knows something about "free markets". He started a little company called Amazon.com. I'm sure you've heard of it. He's kicking Walmart's butt.



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