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The fantasy of a $26 an hour minimum wage

POSTED May 13, 2014 11:16 p.m.

Congresswoman Barbara Lee is advocating placing California’s minimum wage at $26 an hour.

The East Bay Democrat believes it will help end poverty and that all businesses — including small ones — will be able to absorb it without layoffs or significant price increases. She bases those declarations on the fact many years ago before she ran for Congress she had a small business. Her “small” business had 300 employees.

Someone working 40 hours a week at California’s current minimum wage of $8 an hour makes $16,640 a year. Under Lee’s plan they’d gross $54,080.

That means a California business with two full-time employees at minimum wage would have to come up with $74,880 more a year plus added payroll taxes making the real additional cost close to $100,000 annually.

Walk down Yosemite Avenue or North Main Street in Manteca. How many small businesses do you think clear that kind of money in a year?

Lee, of course, would argue those making $26 an hour would have more money to spend so therefore they’d be more money chasing goods.

Let’s not ask remedial questions such as what happens when there is too much money chasing too few goods. Nor should we ask how many people making significantly more than the minimum wage currently such as teachers, journeymen carpenters, mechanics and such wouldn’t demand high wages?

If a high-skilled and productive mechanic is paid $30 an hour to work at a dealership they aren’t going to sit still if an unskilled person running parts makes almost as much as they do. If they didn’t make more, it would take away the incentive to train to become a mechanic. Why spend $20,000 to $30,000 and all that time on a trade school when you can land an entry job with no skills and make almost as much money?

It is a fantasy to believe prices wouldn’t go up. If they didn’t, the only way a lot of small businesses could stay afloat would be to not hire any more employees, reduce staffing, and to replace whoever they can with automation.

Believe it or not, there are a lot of government employees including teachers without a lot of seniority who do not make $26 an hour. Exactly how is government going to cover the tab?

Well, someone making $54,080 a year will be paying significantly more in taxes than someone making $16,640 a year. But that is in the form of state and federal income taxes that do not make their way down to local government that provides essential services such as fire and police protection, education, parks, and streets.

Perhaps politicians will go to their favorite whipping boy of the 21st century — business — and demand they carry the burden of financing that new societal ill solution to the $26 minimum wage as well. They are already becoming healthcare insurance providers and under Lee’s proposal wiping out poverty, two things that Congress has been unable to do effectively after 50 plus years and billions of dollars. Why not tax business even more to cover the cost of paying all government workers at least $26 an hour?

Those that think like the congresswoman would argue someone has got to get hurt so someone else benefits. The mission of choosing winners and losers to redistribute wealth and power is what government is now about. Taxes and regulations at one time were based on the need for the common good. They are now being used more and more not just in a myopic bid to level the playing field and make life fair but also to penalize others so Uncle Sam can have the money needed to pull other people up by boot straps made of tax dollars.

In Lee’s world, those on fixed incomes such as seniors trying to live almost exclusively on Social Security won’t feel a thing from a $26 minimum wage as businesses will not have to raise prices.

California’s minimum wage is already scheduled to go up to $9 an hour on July 1. Then it increases on Jan. 1, 2016 to $10 an hour. Each movement will put $2,080 year into the gross paychecks of full-time workers toiling at minimum wage.

That will help somewhat but as anyone making that kind of money can tell you the price of everything is going up. In many cases it is because of stealth taxes that politicians like Lee collapse into the price of goods such as the 12 cents a gallon greenhouse tax coming next year.

Perhaps if Lee can guarantee small business prices won’t go up she can also guarantee that government taxes won’t increase either nor will government expenses.

That would be even more amazing than California businesses not having to raise prices or cut jobs if the minimum wage was jacked up to $26 an hour.

This column is the opinion of Dennis Wyatt and does not necessarily represent the opinion of The Journal or Morris Newspaper Corp. of CA. He can be contacted at dwyatt@mantecabulletin.com or 209.249.3519.

 

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