There is currently a strong drive to raise the minimum wage. Perhaps this is an effort to take people’s eyes off of the Affordable Care Act, or maybe it is to get people’s minds off of the economy that continues to slowly turn six years after the “Great Recession” started despite trillions of dollars being spent on stimulus. Unfortunately, raising the minimum wage will just result in jobs being cut. There is really not enough profit in businesses that employ minimum wage workers to raise wages by much and still make the investment worth the risk that is being taken.
You see, you cannot pay a worker more than he makes for the business in profit. If a person sitting at a counter, taking orders creates on average $15 per hour in business, and providing the service costs $8 per hour, you can’t pay more than $7 per hour without losing money and eventually going broke. In fact, it is unlikely that you would pay more than $5-$6 per hour because otherwise you wouldn’t be making any money for your efforts in running the business. If you are forced to pay no less than $10 per hour, you will lay people off until you are making at least $12 for each worker remaining. If you can’t do that, you’ll just close the businesses down, change the business so you can charge more and likely hire more highly trained workers, or move it elsewhere.
It really doesn’t matter how much the worker needs to make to afford expenses. Pay is limited by how much a worker can produce for the business. If you raise the minimum wage beyond that, you are going to hurt the low-income workers since they’ll lose their entire paycheck and not be able to get the experience to move beyond that first job.
So how do you increase your pay if increasing the minimum wage won’t do so? You need to increase the amount you make per hour for the business. If you are able to work more efficiently and make $12 per hour for the business, the owner might be able to pay you $10 per hour. Likewise, if you are a stellar salesman and cause more people to come to the business, the owner can pay you more. Likewise, if you learn to use tools that make you more efficient and you can therefore produce more per unit of time, you can get paid more. To really make money, you need to be able to create more business for the owner through your ideas and capabilities. Your mind will pay a lot more than your hands.
Note that this may not be easy. It is easy to just sit there and do what you are told, but if there are fifteen others guys in line who can do your job with little training, you’ll never make much. It is also easy to just do the things you know, but it is the guy who learns new skills that create more business that is truly valuable. It is easy not to need to deal with other people, but a person who can manage others to get a lot of work accomplished is far more valuable than a person who can only do what he can do with his own two hands.
Remember also that you make money by providing more in service than you receive in payment. You make lots of money by meeting the needs of lots of people. A person who cooks a meal for another person will never make as much as a person who opens a chain of restaurants and serves meals to a thousand people a day. It is all about serving others.
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Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.