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Minimum Wage Increase Hurts Poor, Helps Unions

In January, President Obama used a portion of his State of the Union speech to talk about his efforts to increase the federal minimum wage.  He, and other Democrat Party leaders, are hoping this issue will gain traction and make voters in November think about their paychecks instead of their more expensive healthcare or outright loss of healthcare that resulted from Obamacare.  Democrats will tell you that raising the minimum wage helps poor families. But don’t think for a second that there is any truth in that or in their motivations.  The real reason for the attempt to hike the minimum wage is to help their union allies.

Before getting into the real motivations for the Democrats reasons for trying to raise the minimum wage, let’s do some Business 101 basics.  If you increase the cost of a product, or the cost of getting a product to market, you are going to see those costs passed onto the consumer.  If it costs $1.00 more to get a gallon of milk or a loaf of bread to your local store, you are going to pay a $1.00 more to take the milk or bread home.  It might break down to 25 cents more per hour to get the truck loaded, or the shelf stocked but where ever the costs are increased, you the consumer are the one that is going to pay more for fulfilling your need for that product.

So that is why I say raising the minimum wage actually hurts poor families.  A rich person doesn’t care if a gallon of milk costs $7 or if they pay $6 for a loaf of bread.  They will pay it and probably not even notice the cost.  But a single mother raising her kids will definitely feel the pain of each increase.  When you raise the minimum wage, you hurt those who are making the lower wages. And let’s not forget that raising the cost of doing business also causes those companies to reduce full time job positions or to actually cause layoffs within the company.

It doesn’t take a genius to figure out that products become more expensive when you increase their cost of production and delivery.  So why do Democrats wish to make this their celebrated cause for 2014?  The truth is twofold. First, the know Republicans will fight it and in doing so look like they do not care about low income families.  And second, they know that many union contracts have wage increase clauses that are directly tied to the minimum wage.

So there are two points to remember about this push to increase the minimum wage:

1. IT’S MOSTLY ABOUT UNIONS: Many unions have automatic wage increases tied directly to the minimum wage rate. Raise the minimum wage and you automatically give many unions an instant pay raise. a very insightful article: http://online.wsj.com/news/art…

2. IT HAS VERY LITTLE TO DO WITH THE POOR, WHO WILL SUFFER FROM AN INCREASE: It doesn’t take a genius to understand that if you’re trying to sell something, you don’t usually do so by making it more expensive. The same is true with job creation. If you make it more expensive to have employees, employers will hire less and find ways of cutting jobs where they can. Make it so McDonald has to pay $10/hr for a starting employee and you’ll see even more of those jobs replaced by technology. “May I take you order” will very quickly be a computer generated voice thanks to the Left if they get their way. And in addition to it causing even grater labor problems, think of what raising the rate does the poor in how they live. If you raise the minimum wage, every company has to raise their prices of their products to be able to afford those increased costs. So getting a gallon of milk from a farm to a processing facility onto a truck and delivered to a store would have increases in the labor cost at each level of that process. A rich person doesn’t care if they’re paying $7/gallon for milk. But a poor person does.

If the Left succeeds in pushing through a minimum wage increase, remember that they are doing so to benefit their union supports and with the knowledge that they are hurting the poor.

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