To Whom It May Concern:

I am a new college graduate, as of May 2013.   I am now a working professional in the mental health field of services.  In the past, politics have not been something that truly interested me; however, over the past year or so I have paid closer attention to what was going on with our country, as everything that happens in Washington also has an effect on me and my family.  There are several things that I have found concerning, but have kept my mouth shut on; however, the recent news that the president is pushing for minimum wage to be raised to $10.10 is the most alarming aspect that I have come across. 

The comments section on your website states, “Here's how raising the minimum wage will affect me or my community.”  This statement got me wondering, “How would this affect me and my community?”  At first, this raise in minimum wage seems really nice.  It would get hard working citizens more money for the same amount of work.  What could be wrong with that?  There are several adverse effects that this can and ultimately will trigger though, and it will only be a chain reaction from there.

Small business closures

The first thing that this hike in minimum wage would do is force small businesses to close.  To many, this may not seem to be the first thing that comes to mind, but for many small “mom and pop” stores, that are struggling to thrive with the minimum wage where it already is.  They are unable to pay their current staff or even themselves an average of $10.10 per hr.  I’ve lived the entirety of my 24 years of life watching my father own his own business, and struggle to make ends meet with having to also pay his employees even $10.00 per hour.  It’s just not logical to force businesses to spend more than they bring in.

Change in Revenue Ideas

This brings me to my second point.  For those businesses that choose not to close, they will be forced into raising their product prices.  Let me do some math of my own.  Raising the minimum wage from $7.25 to $10.10 is an increase of 39.31% across the board.  Big businesses obviously don’t want to take a hit in their budgets.  That would mean they would be making less money, and that just can’t happen.  I’m not trying to exaggerate that idea, it’s what we are all taught when growing up.  Money is important, however, it’s not a focus in school.  However, I wasn’t terrible at math when going through school, so let me put this into a real life scenario for everyone to look at.

Our society as a whole is focused on the idea that we need to make as much money as we can.  So, let’s say a small pizza chain has 100 employees making minimum wage of $7.25 per hour for 40 hours a week.  These employees would be making on average about $15,080 each over the course of that year, before taxes.  Let’s say about 20% of that is taken out for tax purposes.  Twenty percent of $15,080 is approximately $3,016.  So if we subtract that from their gross income, they would be left with an approximate net income of about $12,064.  Let’s go back and look at the overall amount of the 100 employees.  That’s simple, we just add a couple of “0’s”, so the employer would be paying out a gross amount of $1,508,000 ($1,206,400 after taxes) each year. For the ease of things, let’s say that the owner of this chain wanted to have revenue that was equal to double what they were paying out in employee salaries.  That would mean that they wanted to bring in at least $3,016,000 each year.  Now, for ease, let’s say each pizza cost $10.00.  In order to make the goal of $3,016,000, they would have to sell at least 301,600 pizzas, or 827 (826.3) pizzas per day. 

Now, let’s look at the same scenario with the increased minimum wage.  Instead of employees making $15,080 a year, employees would be making $21,008 per year before taxes, and with the estimated 20% of annual taxes being taken out, it would be about $16,806.40 of net income. With this increase, that means the owner would be paying $2,100,800 ($1,680,640 after taxes) in employee salaries.  That’s a difference of $592,800 ($474,240 after taxes).  The employer obviously would not want to lose more than a half a million dollars of revenue due to this increase, so the money would have to be made up in one of three ways.  These three options include, an increase of production, the prices of pizzas will have to go up, OR they would have to fire some of their employees. 

Additional Production

First, let’s look at the first option.  On average, this company already has to make at the very least 827 pizzas a day.  Let’s say that there are 3 different stores in this chain.  That would mean that each store would have to produce at least 276 pizzas a day.  Let’s add in the additional revenue now.  At the same rate of $10 per pizza, that would mean that the company would have to sell an additional 59,280 pizzas.  That make for an additional 163 (162.4) pizzas per day.  That comes out to be an additional 55 (54.33) pizzas per store.  That would mean that to keep the same revenue each location would have to produce 331 pizzas per day.  That’s an increase of 19.9% of production per day.  Logically that would be difficult to do if the employees were already staying busy 100% of the time. 

Increase of Prices

Obviously, the first option would be the most illogical to be able to require of this chain, so one of the other two options has to be the most considered.  Let’s consider that these chains would need to have the amount of production, but also produce the same amount of profit.  So the original output of pizzas was found to be about 301,600 pizzas.  These pizzas would have to produce an increase of $592,800 worth of revenue.  This means that the price of the pizzas would have to increase.  So let’s divide the $592,800 by the 301,600 pizzas.  This gives us an additional $1.97 per pizza.  So the price of the pizzas would immediately have to increase to $11.97 each.  That’s an increase of 19.7% over night to adjust for the employees increased wages. One thing that this doesn’t account for is any of the extra profit that is needed to adjust the overhead of all utilities as well as property taxes and mortgages or rent for all of the buildings.  That would be an additional amount of money that would also had to be made up in the prices of pizza as well.

Employee Termination

The third option and easiest way to figure additional revenue savings would be employee termination.  This may lead to a smaller increase of prices as some adjustments would still need to be made, but would still be consumer friendly and wouldn’t push as many customers away from their products.  So let’s look at the minimal decrease in staff in order to adjust for that loss of $592,800 in revenue.  As previously mentioned each employee costs about $21,008 each year.  So, that would mean that we would have to divide $592,800 by $21,008 and we will see that 29 (28.22) employees would have to be let go.  That would mean that the company would have to lose 29% of its employees.

Now what wasn’t mentioned was that the other 71 employees would have to still be able to keep up the same amount of production.  This could be a difficult task, as we can see by looking back at the first option where they would have to increase their production in order to keep the same amount of profit.

Ultimately this would be the worst scenario to consider, as it would create deficits not only in the employee termination, but also in the previously mentioned scenarios as well.

Focus Is All Wrong

As our economy has been struggling, and has continuously been decreasing over recent years, it is a huge focus to get this problem figured out.  We need a permanent solution, rather than something temporary.  We cannot put a simple band-aid on an open wound so to speak.  To me, our focus of making more money is all wrong.  I’m not saying that money is the problem.  I’m saying that our focus on making it so the United States is putting so much focus on the citizens to make more money, and just giving handouts to the population.  This increase of minimum wage is exactly that, a handout.  The workers are doing the same job that they chose to do.  Many people don’t necessarily like what they are doing for work, however, they accepted the position and the pay rate that they are getting.  If they don’t like it, then find a better paying job.  Work for what you make.  If we keep increasing the amount of money a person makes for nothing, like raising the minimum wage, we are only hurting ourselves.

I don’t necessarily mean that people don’t deserve to make more money; what I’m trying to say is that they need to negotiate that within the companies and work towards raises, or finding jobs that do pay them better.  I am all for trying to make as much money as you can while trying to support a family.  As I mentioned in the beginning, I’m a recent college graduate and wouldn’t mind making more money either, for the simple fact that I need to pay off student loans.  However, I also think about the logicality of what raising minimum wage will do. 

What About the Dollar?

One thing that I’m concerned with is the idea that raising minimum wage would cause even more financial struggles.  This being because, if we raise minimum wages, then what will happen to the dollar? I’m concerned that other countries will view this as a weakness in our current economic situation (which they wouldn’t be far off), and the value of the dollar will drop significantly.  To me, this increase in the minimum wage is a desperate move to try and satisfy the citizens who don’t truly understand the future implications that will come from it.

Quality vs. Quantity

Personally one thing that I think we need to focus on is more the quality of work.  If we just give people a large amount of money, what do they have to work for?  The quality of the production has the potential to decrease significantly.  I feel that many positions should be paid purely on the basis of their quality of work combined with the quantity.  That is the whole purpose of “raises” in the work place is it not?  Why would we start wages at such a high price, just for people to be making wages equal to others in the same field who have been working to make more money?

Let me provide you with a perfect example as to what I feel would be a better way to solve this issue.  To me, it makes more sense for many positions be paid similar to waitresses/waiters.  Waiters and waitresses take significantly lesser amounts of money and depend on their “tips” in order for them to make a living.  This not only forces them to do their job, but it forces them to provide a quality experience for those who are coming in as customers as well. 

Now of course, there are always going to be those few people who think they are above the rest, and feel as if they don’t need to “tip” well, however, if we put focus on both quality and quantity, I feel as this would help us economically as well.  The better quality of the product we put out, the more we can profit from the efforts as people would be willing to pay more for a quality product.

A Reasonable Explanation and Possible Focal Need

Personally, I believe that the focus on the unemployment rate has been something of concern.  I agree that this is something that needs to be focused on more; however, I think the focal point needs to be adjusted in a little bit of a different direction.  For many, unemployment is more useful than actually being employed.  There are more people that feel more capable to live without having a job.

Welfare

As sad as it is to see the unemployment rate so high, there are many people that are actually able to do better than a portion of the population that are actually in the work force.  Therefore, many of them actually choose not to get a job, because they fear that they won’t be able to receive their welfare anymore and are actually afraid as to whether or not they’d actually be able to live off of a steady working income. 

A CVS employee actually stated that his customers come in and one of them openly admitted to having more kids so that she was able to get more welfare for her family.  To me, to fix the unemployment problem, we need to look into how easily people are able to receive this welfare.  I feel if there was a reform and certain, more difficult requirements had to be met before receiving this kind of help.  For instance, people applying must be able to show that they are unable to work, are actively searching for work (copies of applications turned in, with possible written statement stating it was received by company applied to), or something similar to this.  Also with this I feel that drug testing must also be a focal point as to whether or not someone actually is able to receive this welfare which could also include alcohol testing as well.

This is how I feel the raise in minimum wage could have an effect on me, as well as the community around me.   Also in this is an alternate solution that I feel would help solve the unemployment issues or at least part of it anyway.

 (If you agree please go to the white house page and sign that petition as well to get their attention at this link:  https://petitions.whitehouse.gov/petition/do-not-raise-minimum-wage-1010/JJNFnrtv )

Signed,

 

Cody Roberts