A Minimum Wage Increase

Minimum Wage Increase – Good, Bad or Ugly?

I am just going to lay it on the line. A minimum wage increase will hurt those who need a job the most (students and those without a higher education).

  1. A company budgets for the number of staff on their floor, and they will reduce staff and increase automation if the minimum wage increases.
  2. If costs are passed to the consumer, it is likely that a company will loose market share. Especially if competitors are offshore.
  3. If labor increases in cost we may lose more jobs overseas.

The General Motors Case

General Motors has roots in the Oshawa area back to 1876 as the McLaughlin Carriage Company (Later McLaughlin – Buick). Facilities and staffing increased year over year until the 70’s. As time went on labor costs in the union environment rose to the point where production was no longer economically viable at the Ontario facility. Oshawa GM production facilities have closed one by one. A fragment of the original production capacity and personnel remain. You would think the Union onsite would keep wages in-line with other GM facilitates across America to preserve jobs. Unfortunately this has/did not happened. Like water in a river rolling down a hill to the ocean, Oshawa GM labor jobs followed the path to the cheapest production facility. Another GM facility in the south with much lower wages. This is very reasonable form a company perspective.

Ultimately lower paying jobs are better than none. I want students and others without formal education to be able to obtain jobs. I would also think that governments would prefer more people employed rather than a reduced number. Greater tax base and less people on social assistance.

Those in management are never affected by changes in worker salaries. They balance labor cost against what is budgeted. They chop when they exceed the allocated budget. Higher salaries? Then fewer workers and more automation.

Seasonal workers from Mexico come in to pick our crops as we wish too much money to pick are own fruits and vegetables. Online assistants are taking over IT. You can hire online IT network administrators, programmers web development etc full-time for merely hundreds per month (India, Philippines). Companies are moving in this direction (they need to be fiscally responsible to their shareholders). Let’s try to keep the jobs here and not price ourselves out of employment. Raising the minimum wage will only lower the number of jobs here through automation and/or promote an increase in offshore work.

What are your Thoughts?

Will increasing the minimum wage be inflationary and decrease the price of homes and help low income earners?