So it would appear that a business owner’s decision as to what they will pay their employees is about to be taken out of the business owner’s hands. Of course, the minimum wage has been with us for decades, but now the citizenry of Seattle, Washington will decide in the upcoming November elections if their minimum wage is to be raised from $9.19 an hour (currently the highest minimum wage for any state in the nation) to $15 an hour. The brilliant decision to put this idea on the ballot obviously comes from those who have never run a business.
Let’s assume this insightful initiative actually passes, because after all, who can support a family on a $9 minimum wage? (That’s the so-called main argument for the change.) Indeed, if the increased minimum wage is approved, one of two possible outcomes will occur.
First, let’s consider a restaurant that employs 100 people at $9.19 per hour, which equates to $919; as compared to employing 100 people at $15 per hour, which is $1,500. This results in $581 less per hour in profit. If it is a privately owned company, the owner just makes less money per hour, and multiplied by 40 hours per week, the owner makes a whole lot less. What’s the simple response? The answer would be to raise prices in order to maintain the profit. Yet, if the business’s suppliers are all operating under the same minimum wage increase, then the business owner’s costs will increase dramatically because of the multiplier effect, which means even higher prices for the consumer. At that point, more than likely, the same enthusiasts who supported the increased minimum wage will stop frequenting the restaurant. Why? It’s because the prices will have jumped too high.
Along with his 40-years of dedication in the financial services industry, Bill is the President and CEO of GPSforLife, has recently authored a highly successful book entitled 44th: A Presidential Conspiracy, publishes his dynamic monthly financial newsletter MacroProfit, and faithfully continues his third decade on the radio with It’s All About Money, which can be heard weekdays on Money Radio in Phoenix and in podcast form on his website (and on smartphone apps) published at billtatro.com weekdays at 5pm Eastern. Bill can be reached via email at firstname.lastname@example.org and on Twitter @tatroshow.