Minimum Wage = Maximum Wage

16016747503_33ed8c3bce_bOne point I’ve never heard made in the minimum wage debate is one that I learned first-hand as a business owner:

When you set a minimum wage, you are actually setting a maximum wage.

To me, the two hardest parts of planning a business are pricing and wages.  When I first started my business I sat down with every employee or vendor position that I needed and worked up a basic hourly wage for each.

A minimum wage was so far back in my rear-view mirror, I had actually forgotten that there even was a minimum wage (insert hoity toity laugh here).  I’m really not that old, I just have a bad memory.  I have to blame it on hard living in my youth – or good living, in my opinion.

I had set my entry level positions at $20/hour.  I knew this hourly rate was somewhat high for the position but I didn’t realize how high until I was informed by my business adviser.

“You’re not going to even be able to get off the ground with these kind of salaries,” he balked.  “I advise three businesses in your same field and they pay their entry level employees just above minimum wage.”

I’m a woman and therefore not used to taking ‘no’ for an answer, “I know, but I want to attract the best candidates possible to work with us so I insist on $20/hour.” I refuted, “Plus, that work is crappy and mundane.  No one wants to do that.  They should be payed well.”

“You don’t want to do that kind of work,” he replied.  “But, there are people who do want that kind of work primarily because it is easy and mundane which is why your competitors pay $8/hour and will out-price you every single time.”

He also informed me that if I set the entry level wage at $20/hour, I would have no where to go from there in regard to raises.  I would be pricing myself out of business.

He was right.

The wage had already been set, the minimum wage.  Which was really a wage set by our government.  But, imagine if it hadn’t been.  Perhaps the first guy would have had the same perception that I had and set that particular wage at $15/hour.  Then, the free-market would have determined the wage and set pricing around that wage.

The wage set by the government becomes the anchor, even $10/hour is a lot because it’s $2 over minimum wage.  In reality, we would be better off, in my opinion, if we had no such anchor.

This is where big government types infuriate me.  They set the laws then complain about the laws and squawk that they must be elected to fix the very laws that they set.  Yikes!  They even complain about and demonize the employers who are just abiding by the laws they set.

I argue that had they stayed out of wages to begin with, our entry level wages would be much higher.
photo credit: Payroll via photopin (license)