Raise Time

The folks we can't live without - those in the fast food service industry, custodians, landscapers - are getting another 10% raise; their second 10% raise in as many years. I know if I got a 20% raise across two years I'd be ecstatic. However, it's a different story if all of my peers got a raise along with me.

This looks very similiar to inflation. Let's break it down:

Let's say I'm a farmer who sells milk. I employ uneducated labor and pay them minimum wage to milk the cows, bottle it, and deliver it to the local stores. For this example, we'll say that rent in our area is reasonable, so the federal minimum wage of $5.85 suffices to keep a roof over your head and provide basic necessities.

Now, in the course of two years, the federal government increases the minimum wage 20%. As a farmer who doesn't make much money in the first place this will cripple my business. I can't afford a 20% increase in my labor costs. I have two choices: 1. increase the cost of my milk to compensate for this wage increase or 2. keep the milk price constant and lay off 20% of my workforce. More than likely I would pick choice one.

Overall, I don't like either of those scenerios. And the scary thing is this doesn't just affect the cost of milk - the cost of EVERYTHING will increase and/or unemployment will rise. Food costs at the grocery store or restaurant, dry cleaning, gasoline, getting your oil changed. So, even if you were making minimum wage and received a 20% increase you will likely lose the "extra" cash within the next year or two. And, if you're part of the majority of Americans who didn't get a raise this year that means you'll feel this increase the most.

Most states/localities already have higher minimum wage rates than the federal level. These rates are best determined by the local governments - not the feds.

I'd love to hear your comments!