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Fearless Philosophy For Free Minds: Negotiate Your Own Minimum Wage

Thursday, January 11, 2007

Negotiate Your Own Minimum Wage

One of the top priorities of the new Democrat-controlled congress is to use the heavy hand of government and force employers to pay employees more than the employers believe the services of their workers are worth. Ted Kennedy uses emotional language suggesting that far too many people in this country are not being paid a fair ‘living wage.’ This from someone who apparently knows nothing about economics and who is only rich and powerful by an accident of birth (unlike most wealthy individuals who are high achievers).

Most Americans are working a ‘minimum wage’ job. I am one of them. Not the federally mandated minimum wage, but the lowest wage I am willing to accept for my time, services, efforts, knowledge, and skills. Most Americans accomplish this by negotiating a wage when an offer is made by a prospective employer. When the offer is made, the prospective employee decides whether or not to accept the offer. No company in America can force any individual to accept an offer he or she does not believe to be acceptable.

Last summer, I went through this very process. I ended my employment at a company I worked for in Arizona to make a move to Denver, Colorado. Once I was settled in to my new digs I visited some websites to determine the cost of living in Denver, Colorado versus Phoenix, Arizona. I learned that the cost of living in Denver was slightly higher than Phoenix. I wanted to make no less than I was making at my previous job so I adjusted my ‘minimum wage’ I would accept accordingly. I also took an inventory of my skills which I have acquired over the past few years and searched for job openings that I believed matched my skill sets. I could have all the necessary skills in the world for my given field but if there was no market for these skills, I would have to reconsider what my minimum wage would be. As it turned out, the market for experienced structural CAD drafters in Colorado was very good…could I consider raising my minimum wage?

After only a few weeks of making contacts with employment agencies and talking to prospective employers, I found a company which I believed to be a good fit. The offer was a half dollar an hour less than the wage I wanted but I took into consideration other factors such as the healthcare plan, flexible spending account for medical expenses, 401k plan, vacation time, commute, training opportunities, etc. After considering all these factors I decided that the prospective company met my minimum requirements.

What is missing from this process? The answer is government. In no point in the process did I write my congressman nor did I seek out a union to demand that engineering companies pay CAD drafters the wage I believed CAD drafters of comparable experience should be worth.

The Ted Kennedys of the world would have us believe that my situation is unusual; that most Americans cannot receive a ‘fair’ wage without the help of the federal government. Nothing could be further from the truth. According to a 2005 Department of Labor report (the most recent report available) those who make at or below the federal minimum wage make up only 2.5% of the Americans who earn an hourly wage (1.9 million workers). One quarter of those making at or below the minimum wage are between 16-19 years old. What about adults who are trying to ‘live’ of the ‘living wage’? Roughly 2% of individuals over 25 years of age make at or below the minimum wage; most of those who do don’t depend on their minimum wage job as their primary source of income.

If the minimum wage directly affects such a small portion of the workforce, why are the Democrats pushing it so hard? There are several reasons but the main reason is that they want to appear as though they are ‘doing something’ for the poorest among us. The minimum wage hike overwhelmingly passed the House yesterday with broad bipartisan support. Senate Republicans, not wanting to appear unsympathetic to the plight of the poor, will likely also support the minimum wage hike and President Bush has already indicated he would sign it into law. But will raising the federal minimum wage truthfully help those who are supposedly going to benefit?

On paper, raising the minimum wage appears to help those whose wages are dependent on the federal government…until other factors are considered. First of all, if someone is barley getting by on $5.15 an hour, would raising their pay to $7.25 really help all that much? Seems to me these individuals would need a little more to see a difference. Another question to consider: would employers cut back on their hiring or lay off some of their current employees to maintain their current profit margins or would they simply raise the price of their services?

While paying entry-level employees an extra $2.10 an hour does not seem like a whole lot, one should consider the impact of this government-imposed raise (with no economic considerations for businesses both big and small) on the overall cost of doing business. Suppose you own a chain of supermarkets with 200 workers making the current minimum wage of $5.15 an hour. The government now tells you that you MUST pay these people $7.25 an hour. By my math that’s an additional $420 an hour, $14,700 a week (assuming each of the 200 workers work 35 hours a week), and $58,800 a month ($14,700 x 4 weeks in a month). That’s only considering the impact of raising the wage itself without considering increased cost of payroll taxes or those who earn more with earnings based on a factor of the minimum wage.

What are you going to do to absorb these expenses or are you going to be willing to accept lower profits? Assuming you want to maintain your profit margin, you will have to lay off some workers, cut benefits (i.e. healthcare), or increase your prices; all actions which will do the most harm to the unskilled workers (those who do not lose their job pay more for the same groceries negating any benefit of the $2.10 raise from the government). If your business is already struggling to stay in the black, this could be enough of a difference to close your doors permanently which would result in all of your employees losing their jobs. Does raising the federal minimum wage still sound like a compassionate thing to do?

I realize that, for all practical purposes, I have lost this debate. The majority has spoken. But because I am in the minority on this issue does not make me wrong. I also realize that there is a chance that someone might read this post who currently makes the minimum wage and is angry that people like me oppose the measure. To you I want to say that there is no shame in working these jobs provided that you are doing all you can to improve your situation. I worked a minimum wage job until I was 20 (while going to trade school). I eventually got tired of having very little money to live on and was inspired to pay more attention in class. After graduation I found my first job as a CAD drafter being paid a wage I could have probably made at Wal-Mart (this is not a knock on Wal-Mart). From that point I gained experience that would help me in the rest of my career. I have since returned to school to acquire even more skills to have even more career options. Again, there is nothing exceptional about my story…I’m just doing what is required to make a better life for myself and my family and you can do it too.

My point is this: if you want to make a more livable wage, don’t wait for Ted Kennedy to give you a raise, have some initiative. Stay in school, pay attention, work hard, and negotiate your own minimum wage.

Related Fearless Philosophy Posts:
‘Living Wage’ was one of my 10 Terms and Phrases to be Wary of
The Virtue of Selfishness

Related Posts and Articles by others:
Minimum Wage, Maximum Folly by Walter E. Williams
The Real Cost of a Minimum Wage Increase by Doug Mataconis
Sticking it to Low-Skilled Workers by John Stossel
Dems to Tackle “Income Inequality” by Larry Elder (“Income Inequality” is another phrase that’s a pet peeve of mine)


Blogger T. F. Stern said...


I must be getting sick, I couldn't find anything in your article to disagree with; call a doctor, quick.

6:59 PM  

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