Ed. Note: here's a piece I've been working on for a bit regarding the minimum wage thing. Yesterday, our CFF Feature Writer & National Affairs Correspondent Perrin Lovett gave his thoughts as well.
*Cross-posted at marshallmccart.com
With the recent developments of a Biden White House, along w/ Democratic control of both the House of Representatives & the U.S. Senate (technically), some are speculating that a $15/hour minimum wage is actually close to becoming a reality. For the record, I don't think so. I think a compromise will have to be made (there's actually at least a couple of Democratic Senators who are more conservative than a few of their GOP counterparts) & we'll likely see something more like in the $10-$12.50 range.
Regardless, this is a terrible idea...
Let's delve in.
Based on most information available, only approx 3% of the US Workforce actually makes minimum wage. So, the question is begged -- why is this even a thing?
The obvious answer to this is two-fold, in my estimation.
1. Control. Sending a clear & concise message that the federal government is, once again, the end-all, be-all arbiter of force in America vis-a-vis all things, especially economic, but also basically everything else.
2. Part of a concerted effort to tank the American economy so as to reduce her sovereignty & therefore empower China and the global power elite to reduce her might & clout.
Of the previous two points, I know I'm absolutely right on both of those just like I know that the sky is blue & the sun will rise from the east tomorrow morning, though at least a few of you reading this will think I'm totally wrong.
You're cute...
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I'm tempted to just leave it at that.
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But you need more, yes?
Good. I'm glad.
Here you go:
Let's say we have a product. We'll just call it "The Product" for our purposes.
The manufacturer of said product sells this product to various wholesalers/distributors at a price of $10 per unit (some, who buy in bulk - maybe a little less).
*Most all goods in America have multiple levels of distribution (except, now, Amazon).
So, Biden & the America Last crew gets a $15 minimum wage passed & that increase goes into effect.
This manufacturer sees that they'll have to increase their price by 32% to make it up w/ the increased labor costs. So, the product that was $10 per now goes up to $13.20.
Next level:
The wholesaler/distributor that was paying $10 per unit (and was previously charging a 100% mark-up on) is now having to pay $13.20 per; however, now the wholesaler is dealing w/ the same problem that the manufacturer had. Their workforce payroll is now also having to increase. Based on their in-house analysis, they've found that they'll have to increase their mark-up by 27% to make up for increased labor costs on top of their previous gross mark-up of 100%. So, instead of the $20 they used to charge the retailers that bought from them, it will now be [$13.20 x 100% mark-up, plus the additional 27% because of the minimum wage hike] : $33.53 per to the retailer (a total increase of 67.6%; and we're still not done).
Now to the retailer. The business that actually sells to the public.
They have now seen their cost of goods sold increase the aforementioned 67.6%. This retailer has always used a 25% mark-up/gross profit model. What they used to sell for $25to the general public, will now undoubtedly have to go way up.
So, they add their usual 25% mark-up to their new COGS (cost of goods sold). That number in now $41.91.
BUT...Big But...this retailer now has to factor in their own increase of labor costs. They've found that they'll need to tack on an additional 22%.
So now, when it's all said & done, the retailer will now be selling "The Product" for the new price of:
$51.13 per unit vs. the $25 they used to charge.
So, the minimum wage has increased two-fold & so will the prices.
So...what's the point?
The two points are these:
1. Corporate America will weather this storm very nicely while a large majority of small, independent businesses won't (a win for the unholy alliance of Big Biz & Big Gov - and China, et al).
2. A doubling of the money supply will only greatly benefit the bank$ters & Wall Street.
And that's the fact of the matter, America.
If you've already gotten it; or, now you get it. Well Done! Thanks. Now get off your asses & go make a difference!
For those of you who made it to the end of this & are just still stuck in your own general malaise & dissonance ( or can only do what your phone tells you to) -- bless your hearts!
We're all still pulling for you, though...
- Marshall B McCart | 31 January '21
