Alright….SO…..this is not a political post. This is economics…kinda.
Ya know, anyone who has ever tried to compute their Social Security Benefits or their VA disability will tell you that Government Math is really a mess. I think that’s why they pushed for the Common Core curriculum….they didn’t want anyone to be able to tell how utterly ridiculous their cipherin’ is.
It actually trickles all the way down to the armed forces. I’ll give you an example….Math for Marines:
You have 14 Marines. Each Marine is allowed two beers per night in any month with the letter “R” in it, unless it’s raining or the temperature falls below 45 degrees. How many beers do you get for your fourteen Marines on a warm, dry evening in the month of September?
Everyone would say 28, but that is short sighted. I’m a Marine too, so there’s a total of 15 of us which would make the correct answer 30, right?
WRONG
According to Government Math, the correct answer is 19 Cases.
Now, remember…this math is brought to you by the same rocket scientists that pay $99 for a hammer.
So, anyway…the topic of discussion tonight is the proposed $15 per hour minimum wage. The question keeps getting kicked around and I keep hearing how it’s going to kill small businesses and drive unemployment through the roof and before long all service jobs are going to replaced by computers of some sort. Aaaannnddd…..I don’t disagree with any of that.
Nobody in their right mind could mount a decent argument to disagree with that logic. It’s simple economics….If I have to pay Johnny twice the money to dip french fries in hot oil, I’m going to have to double the price of the fries just to pay Johnny, right?
WRONG
You’re not going to have to raise the price of the fries by 100%….you’re going to have to raise the price of the fries 107.65%. We’ll get to that other 7.65% in a little bit.
The question that I keep hearing is “Why are we doing this if it’s going to wreck the economy?” I’m not really sure about what the brain trust up in D.C. is thinking, but I think I’ve got it figured out. Washington gets a boat load of money if they raise the minimum wage to $15.
Alright….so try to follow along and hold questions until the end of the lecture. I’ll try to keep this as short and sweet as I can. Here we go!
The current national minimum wage is $7.25. On a 40 hour work week that equates to $15,080 per year. That’s not really what they term a “livable wage”, but it’s enough to work your way through a small college or trade school if you’re still living with your parents.
If we take that minimum wage up to $15.00, that 40 hour work week now yields $31,200 per year. I’ll give it to ‘em…that’s actually a livable wage in a large portion of the country. So it seems anyway.
I think that’s where they stopped doing the math. Or maybe they kept doing the math and liked what they saw so much that they decided to drive the bus right off the cliff with this one.
As the math continues:
$7.25 per hour = $15,080 per year. $15,080 – 12% Federal Income Tax = $13,270 per year. So you’re currently paying the federal government $1810 per year.
Now….that $15,080 also gets taxed by the state and local governments. Those rates vary from state to state, but I did the average and it came out to 7.46%. We’ll go with the average. $15,080- 7.46%=$13,955. So (on average) you’re paying the state $1,125.
But Wait! There’s More!
Out of that $15,080 you’re going to have to pay Social Security and Medicare Taxes at 7.65%, which equates to another $1,153.
SO….at $7.25 minimum wage, working 40 hours a week, you’re only bringing home a little under $11,000. You’re paying $4117 in taxes to the federal, state and local governments. Remember that number….$4117.
Alright…at $15.00 per hour:
$31,200 per year. $3744 in Federal Taxes. $2327 in State and Local…and…$2387 in Social Security and Medicare. So that brings us down to $22,742. Which means the Government now makes $8458 off of your same amount of work.
So….by increasing the minimum wage to $15 an hour the Federal, State and Local governments increase their net gain an average of $4341 per worker collecting minimum wage.
Google says there are currently 1.7 Million people working for minimum wage. A quick calculation tells us that the annual increase in tax revenue when the $15 an hour minimum wage hits will be $7,379,700,000.
Again….But Wait! There’s More!
Remember back at the beginning when I said the price of fries would have to go up 107.65% to cover the doubling of the fry chef’s wage increase? Well, that extra 7.65% is due to the fact that the employer has to match the Social Security and Medicare taxes the employee pays. At the $15 minimum wage that equates to $2387 per year, per employee. Or, nationally….$4,057,560,000.
Just to make it a nice round number, we’ll call it $11.5 Billion annually in increased tax revenue.
Now….that number doesn’t include the fact that most state and local SALES taxes are percentage based as well. So what happens when you’re paying $4 for a large iced tea instead of $2…..the government is taking more of your money…..and they’re taking more money from the kid who got a raise to $15 when he buys a $4 iced tea too.
If the minimum wage goes up, the prices of everything will go up. The higher the prices go, the more money they make at the state and local levels in sales taxes. The more money they make in their taxes, the less they have to request from the federal government, so D.C. gets to hold on to that extra $11.5 billion because the states and counties are making a killing on sales taxes.
The kids now making $15 an hour still can’t afford anything because the prices all doubled shortly after their paychecks doubled. We’re not buying as much because the prices skyrocketed, but when we do the sales taxes are killing us.
The employers can’t afford to stay in business because nobody will buy their products at the prices they have to ask so they can afford to pay the minimum wage increases. But it gets worse….the price of potatoes goes up because the farmers now have to pay their field hands $15 an hour, the transportation warehouses have to pay the forklift drivers $15, etc., etc. Now the french fries are getting damned expensive.
When you peel the onion back, the governments are the only entities that make out on this deal.
BUT….that increased tax revenue isn’t going to last too long. In time all the minimum wage workers are getting laid off because the businesses can’t sell enough at the increased prices to afford to keep them, or worse…can’t afford to stay open. As the unemployment and food stamp claims mount up, the increased tax revenue will dissipate.
Well, shit. Think about that for a minute…..how damn diabolical is that? If you’re pushing a socialist agenda, you can theoretically drive the middle class into government dependency by mandating their employer pay them more. That’s pretty damn devious. The governments gets to look like heroes for a year or so as everyone’s reveling in their faux livable wage, while state/local/fed is raking in an extra dozen billion or so a year…then they get to look like a savior when the businesses start to crumble under the weight of increased costs due to an unrealistic wage hike and the government is sitting back smiling, ready to start handing out free cheese.
**Humph** To tell you the truth, I hadn’t walked it this far when I started writing this evening. I was just looking at the amount of increased tax revenue in comparison to the increase in the standard of living for the wage earner. The more I look at it, though…the more plausible it is. I’ll be damned.
I must be missing something. Surely they wouldn’t crash a thriving economy intentionally. Could they really want socialism so badly that they’d wreck what’s working in order to drive us under?
Somebody tell me I’m missing something. Please.
Shit…..I’m gonna be up all night now.
And dammit…..now I want French Fries.