Economics 101

By: 
Dennis Warden
Publisher

On November 6 Missourians went to the ballot box and voted on a number of issues. The amendments and propositions that were passed will all have long lasting consequences. Many will not be known for years to come.

One thing is known for sure. We just voted to make it harder for unskilled workers — read teenagers — to enter the workforce. We just voted to encourage factories to relocate out of Missouri or not come here in the first place. We just voted to have more empty stores on main street. We just voted to speed up the use of automated ordering machines in fast food restaurants.

All of this means less jobs.

This is not speculation either. Seattle city leaders voted to raise the city’s minimum wage from $9.23 in 2014 to $13 by 2016, and again to $15 in 2017. Based on the first set of wage increases, Economist Jonathan Meer of Texas A&M reports that total hours worked in low-wage jobs fell nearly 10 percent. So, too, did total payroll for low-wage workers. In other words, “those workers for whom the increase was supposed to help,” Meer notes, “were actually receiving fewer dollars on average after the minimum wage increase than before.”

This column is about simple economics. Something our schools and universities are not teaching, or we as voters have forgotten.

Raising the minimum wage will increase the price of food. It will increase the price of gas. It will eventually increase the cost of living because our economy does not exist in a vacuum.

When you raise the cost of doing business, stores have to raise the price of their products or services. If the consumer will not continue shopping there then ‘mom and pop’ businesses will close.

What the minimum wage in Missouri does not affect is Amazon.com and other online businesses.

Look around and count the number of small businesses that provide a needed product or service. You will pay more or they will close up shop.

What’s amazing is we just voted to raise the minimum wage to $12 per hour, by 2023, at a time when wages are rising. McDonalds has an ad in The Republican this week for $9 per hour when Missouri’s current minimum wage is $7.85 (increasing to $8.60 in 2019).

Who do you know that works for minimum wage? If they do then there is a reason for that.

Walmart’s starting wage is $11 per hour. Area factories advertise a starting wage of up to $15 per hour.

President Trump has been pushing America First, especially with manufacturing jobs. Have you ever wondered why companies manufacture products in Mexico, India and other foreign countries? It’s because of cheap labor. 

Whether you want to admit it or not we live in a global economy and we compete for jobs with not only other countries but also other states. In the eight states that border Missouri only Nebraska and Arkansas will have a higher minimum wage in 2019. Five of our neighbors have a minimum wage of $7.25 per hour.

All of this puts pressure on factories to do one of two things, add more automation or relocate to a less expensive work environment. They have to do this to stay competitive and stay in business.

Following a forced increase in the minimum wage, small businesses, that cannot relocate to another state, will reduce the number of employees, or their hours, or both. What is often overlooked is that small business owners often reduce their own income to keep employees working. Small firms, workers and owners alike, withstand the worst of an increase in the minimum wage.

I started working as the head janitor at Warden Publishing Co. when I was 12 years old, earning 75¢ per hour. At that time I could buy a Snicker’s candy bar for 10¢. My next job was a life guard for the City of Owensville at $1 per hour.

I was paid what I was worth. And that is what it should be. A business cannot afford to pay anyone more than what they are worth.

Both of my sons, Jacob and Ethan, began their working careers at Walmart pushing carts.

Entry level jobs teach us the importance of hard work and give employees experience in the work force. When you fill out a job application the first thing that employer wants to know is your past work history.

Have you ever heard someone complain “how can I get any experience if no one will hire me?”

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