Mandate wrong way to raise wages

I'm not an economic expert, but it seems to me that raising the minimum wage by mandate is a shell game.

It solves no problem, and creates new ones in the form of wage and price inflation.

The way things work now, a person (I'll call him Newby) gets out of high school and has two choices.

He can go back to school to further his education or he can get a job.

If he chooses to get a job, where does he go? Who would hire someone with no skills or experience?

So, he hears that the local McBurgers is hiring, no skills or experience required.

It doesn't pay much, but he gains skills and experience that he can leverage for a better job.

He works there for a year and because of his demonstrated work ethic he is promoted to shift manager and given a $2 an hour raise. The shift manager position opened because the current shift manager was promoted to store manager. The current store manager, having developed many different skills in his career with McBurgers, is moving on to a management position with another company.

Business is good, and the owner of McBurgers is considering opening up another location which would add 12 more jobs to the local economy.

Along comes the government and tells him that he is being unfair to his workers and that he must raise this minimum pay by 25 percent.

So, being the good American that he is, he raises his minimum wage from $7.50 to $9.50.

Newby is very happy; he instantly has more buying power. Good for him.

But wait, the shift manager (formerly a Newby) has worked hard for his position and he has more responsibility. Why should he get the same hourly wage as Newby?

So, in order to keep the management team that he trained and cultivated, the proprietor is forced to raise their wages as well.

Now, everyone just got a fat raise. Yay! Now they all have more buying power. Yay!

But wait, where do all those extra wages come from?

The owner of McBurgers has three choices to find those extra funds.

He can make less profit on the business in which he bears all the risk. He can raise his prices, or he can reduce the number of hours his employees work.

Likely, he does all three. So, now his employees make more money per hour, but they get fewer hours. And, the price of a McBurger is higher now, so the sales go down a little.

The owner is not thinking about opening up another store now. Better to wait and see how this new law works out. Maybe give it a year or two.

Meanwhile, Business, Inc., a local business that traditionally hires from the pool of formerly inexperienced workers, finds that they must now pay those workers more to lure them away from their current positions.

And so it goes. In time, everyone in town is paid more, but the cost of the products in the town are also higher, so the increased wages buy fewer goods.

And, since there are fewer persons employed, there are fewer persons buying goods and services.

And, service is slower and quality is lower everywhere because there are fewer employees working fewer hours.

Bottom line: No more dollars were added to the economy, there are fewer jobs available, there are fewer new businesses opening, and prices are higher for everyone.

So, who has really benefited from the increased minimum wage? Only the politician who got elected by promising gullible people that he was going to get them something for nothing (again).

Walter B. Litman is a Coeur d'Alene resident.