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Minimum Wage Increase - Why am I the bad guy?

Posted by Andrew Aguilar on

     Hey everybody. I've been wrestling with some philosophical issues of being an entrepreneur, and since I am catching some blow-back for stating my opinion (which is apparently unpopular,) I wanted to make a case for my argument and try an experiment. 

Here it is:

     I am AGAINST a minimum wage increase for the following reason. Raising the minimum wage to $12 or $15 will effectively put small businesses like my own out of business. Why? Here's why. At the current minimum wage of $7.25 it takes three hours for me to produce the following amigurumi, which including a $5 cost of material comes to $26.75.

     Now forget a moment the argument that an artist who has spent years mastering my craft deserves to be paid the same minimum wage as a high school graduate with no experience entering the job market for the first time. Let's also set aside the argument that I deserve to make a profit from my work. Let's say (for the sake of argument) that I am going to sell this to you, at cost for $26.75

     I hate to be the bearer of bad news, but extensive market research tells me that $26.75 is NOT an effective price point, even in spite of the fact that this particular character is a two piece plush. (She comes with a removable hoodie.)

 

     Now let's increase the price point by increasing the minimum wage to a mere $12 an hour. (Sorry #fightforfifteen) Now here is our math...

 

$12 x 3 hrs = $36 + $5 materials = $41 product cost - again with no profit

If you agree that this is a reasonable transaction, please buy Bernstien HERE, I need money.

If, like me, you disagree that $41 is a reasonable cost, by all means keep reading.

     Now, one argument I have been presented with is that a wage increase would mean more buying power, and I'd like to address that point. As I understand it, the point of raising the minimum wage is to compensate working class Americans for a living wage, which is to say that Americans working minimum wage jobs as they now stand, are unable to afford rent and food, much less healthcare and amigurumi. Raising the minimum wage is supposed to compensate for that, not give earners of a $12 minimum wage some extra cash to afford that mouse plush they've been really jonesing for. 

     You also have to ask about where that raise is going to come from? Economics dictates that either the business doing the retail, take a loss at their profit margin, or increase the price of goods. Does ANYONE think corporate America is going to take a price cut? CEO's gonna give some handouts to their employees? Congress gonna get paid what the rest of us do? 

     Yeah, me neither. The cost of goods, like Bernstien, will go up so that retailers, like me, will be able to afford the same profit margins while giving that 80% wage increase. My friend shared a really good article by Henry Blodget at Business Insider about this very point, you can read it by clicking HERE

     I was curious about the opinions of my peers, so I made a call to Vicki Drennan of Bickie's Bears here in El Paso. Ms. Drennan is the crochet artist who created Giju. (If you aren't in on the Giju phenom, check out his videos at YouTube by clicking HERE 

     Here is Giju in all his Glory. We paid $5 for him. Speaking to Ms. Drennan, she admits that she does not charge minimum wage, but a mere $3 an hour for a one hour labor cost. Plus materials. At $7.25 minimum wage, she is losing money on every sale. Although she admits that she does not depend on the sale of her crochet to make a living, she knows many artists who do. Drennan goes on to state that she is against a minimum wage increase, stating that the minimum wage was never intended to be a living wage, but was intended as a starting pay grade for entry level applicants.

     Ms. Drennan suggests what I consider to be the most likely balancing point or compromise over this issue, which Business Insider's article completely ignores. The most likely effect of a minimum wage increase, without passing that cost on to the customer is a loss of hours for employees. Sure, you might make $12 an hour, but now you're only scheduled for 10 hours a week. That doesn't seem like a benefit either, cause Americans still won't be making enough to make the ends meet.

     So am I just complaining? Venting? Sure, but I also have a solution to propose. Like Vicki Drennan, I also do not depend on my crochet to make a living. In fact, one little known aspect of my life is that I inherited (along with my mother, father and sister) ownership of several quadraplexes that my grandfather was the landlord for. My sustenance comes from other people's rent. Now here's the kicker - we have not had to raise the rent for any of our over 40 individual tenants in the fourteen years I have been a shareholder of our family real estate holdings.

    Why then, are prices going up on everything from food to healthcare and rent? Inflation occurs when companies raise prices to compensate for the raised costs. Raised costs like increased salaries. The best way to create a sustainable living wage from the intended supplemental minimum wage is to lower costs for companies, allowing them to retain their profit margins and still pay workers a ($7.25) reasonable wage that will then go a lot further.

     So what do you think America? Am I the bad guy for not wanting a minimum wage increase? Cause the way I see it if you support a $12 minimum wage, then you should also value the work and craftsmanship I put into Bernstien the Expensive Mouse, and would be willing to buy one. (For each one of your 19 children hopefully.) Let's see how the sales go...

     Perhaps America will decide to lower production costs and prices instead of raising wages and contributing to the endless cycle. What has happened to the land of opportunity when passion for work dies because artists can make more money flipping burgers at McDonald's than following their dreams?

 

- AP


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