Thursday, February 5, 2015

'Morning Mika' And The Minimum Wage



We were somewhat stunned to see the interview above on 'Morning Joe' recently, not because of the content of the story but because of the reaction and body language of Mika Brezinski, one of the co-hosts.

(Why isn't it called 'Morning Mika and Joe' yet, you have to wonder in these days of equality and all that?)

We thought this was an important lesson not only in the distance many in the media seem to be away from the 'real world' of everyday life where normal people run normal businesses or have normal jobs but also because of the lack of serious understanding about how our free market system works in the first place.

If you don't want to watch the entire 7-minute segment*, here's the basic story line. Alan Beatts, a small bookstore owner in San Francisco, of all liberal and tolerant and accepting cities in America, is going to shut his business down due to the mandated $5/hour hike in the minimum wage that the city recently passed into law.

'That doesn't sound like a very big hike to me', Ms. Brezinski said after Mr. Beatts told his story in a very calm and matter-of-fact manner.

Of course not. $5 is not a big deal to most people. Certainly not someone who is making $2 million per year in salary according to some sources. (Joe Scarborough pulls down $4 million per year which is not bad for a show that may have 367,000 people watch at any moment during their 3-hour morning segments. That is $10/viewer for Morning Joe; $5.67 for Morning Mika according to the Daily Beast.)

But what about to the small businessman such as Alan Beatts, owner of Borderlands Bookstore in San Francisco? How does a $5/hour hike in the minimum wage affect him? He is the 'owner'; certainly he can afford that, right?

Well, let's do the simple math:

He has 3 minimum wage employees. $5/more per hour means his costs go up immediately upon implementation of the new wage scale $15/hour. He has to pay his workers for at least 8 hours per day as they rotate on shifts; time-and-a-half for overtime or holidays and weekends perhaps.

If it is just a straight 8-hour workday for all 3 minimum wage workers, that is $15/hour x 8 hours/day or $120/day in extra costs to Mr. Beatts.

'That still doesn't sound like a lot of money to me!' we can hear Ms. Brezinski exclaim.

Of course not. $120 shouldn't be a big deal to a 'fat cat, wealthy business owner' who are all presumed to be the Koch Brothers by the news media for some reason.

The reality of life in America is that for every Koch Brother, there are probably 13.5 million small business owners in precisely the same situation as Mr. Beatts of Borderlands Bookstore in San Francisco, California. Maybe millions more.

To put this in the bottom-line context, which is important in any business, that $120/day in marginal increased costs to Mr. Beatts amounts to $26,400 over a 220-day work year, just in minimum wage hikes alone. When overtime and holidays are factored in, it could be $36,400 or more.

Mr. Beatts said that the new minimum wage on San Francisco will drive up his costs close to 39% alone not counting any other factor.

In addition to that, he will have to pay his manager more simply because the minimum wage has pushed up the wage scale across-the-board. Every other non-minimum wage worker will want to see his/her hourly wage or salary go up in commensurate scale which will add more costs to his bottom line.

What will Mr. Beatts have to see happen in his bookstore when the minimum wage goes up to $15/hour for his 3 employees to make it work? That is right...he would have to see more books sold on a daily basis to produce enough new revenue to generate a gross profit of at least $121/day to stay ahead of the game.

Is that even possible in these days of Kindles and on-line books against the backdrop of the average American reading only 1 book per year in all likelihood?

Mr. Beatts doesn't think so. So he is making plans to close his bookstore in San Francisco.

So what will happen to these 3 minimum wage workers and the manager? You are correct. They will be laid off unless they can find other work in which case they will leave Mr. Beatts all along to pack up his belongings and close down his shop that he probably bought/built with savings out of his own pocket or credit cards he maxed out to the hilt to get the original inventory of books on the shelves to sell in the first place.

If they can't find other jobs, they will apply for unemployment benefits which will drive up the costs of government and mean higher taxes which will mean another round of more debt and more spending and more central planning by government.

This is one reason why we think everyone who runs for public office should be forced to show proof that he/she had any experience running a business, even if it was a lemonade stand growing up or delivering newspapers back when people used to read them every morning.

Running any business at any level is very difficult work.We have said it before but it bears repeating again: These business people deserve a Congressional Medal of some sort just for taking the risks and making the investments and having the skills to run a business so the rest of us can be employed by them because: 1) we lack the skill to run our own business: 2) we are too risk-averse to put all of our savings at risk to start a business with no assurance that it will even succeed at some point in the future or 3) we just prefer to do our job, go home and let the owner do all the worrying and fretting every night.

What oftentimes sounds like a 'good thing' to do, such as raising the minimum wage by 30% as in the case of San Francisco, many times winds up hurting the very people that political advocates say they are trying to help.

Ask Mr. Beatts and his 3 minimum wage workers.


*( click on the link above if you are receiving this via email distribution to see the entire interview)

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