I’ve had this debate I don’t know how many times with certain lefty bloggers, and I’ve never been able to get my real-world experience across to them. They believe what they’re told by the liberal politicians who push this nonsense on them and throw out meaningless (and distorted) statistics to back it up, and damn the facts and real-life examples I give them. They usually throw in some ad hominem attacks for good measure, but I’ve come to expect that.

Anyway, I’ve said several times that when you raise the minimum wage, one of the following will happen:

1) Employers will raise their prices to cover for the increased cost of labor;

2) Employers will cut back the number of hours they give to these employees in order to maintain their labor budget;

Now, I’m not an economist by any means, but I do know what I’m talking about here. I was in the restaurant business as a manager for about 20 years and I saw this every time the minimum wage was bumped up.

Employers will ALWAYS go for option number two first, because it’s the easiest and least painful (for them, anyway) solution. The problem with slashing the labor budget, though, is that it’s only a temporary fix. It sacrifices how many people are available at any given time to provide service to your customers, which means you inevitably will have poorer service. And that, more than any price increase, will drive customers away and cost you money. So employers usually end up trying a combination of options 1 and 2.

Business owners/managers are usually reluctant to raise prices on their product. Why? Because when you do that, your regular customers get upset and may go somewhere else, and you will lose money in the long run (it’s better in the long run to sell more product at a lower price than to sell less product at a higher price … just ask Wal-Mart). So the natural thing to do is to see if you can make up the cost increase somewhere else. And that “somewhere else” is almost always in the labor budget. That means they will schedule fewer hours to their employees, put off hiring new help, or, in a worse-case scenario, they lay off/fire people.

Why am I bringing this up? Because in a few days, the minimum wage here in Iowa goes up to $7.25 (up from $7). Not a whole lot, right? Well, it has a price.

My wife works part time (not because she needs to, but because she wants to) and she makes minimum wage. She usually works about twenty hours per week (sometimes more, sometimes less). It keeps her in “mad money”, as they say. Anyway, they had a meeting yesterday and — guess what? — the company is slashing their labor budget.

That’s right, just as I said earlier, they’re going to try option #2 first. Those 20 hours that she works will drop to probably around 10 or 15. It’s not a huge deal to her because, as I said, we don’t depend on that money or anything, the job is just something for her to do while the kids are at school.

But there ARE people working there who depend on that job and the hours they get. And they, like my wife, will see a cut in the number of hours they are getting. A 40-hour week will become a 30-hour week.

And just wait until this employer (and others like them) realize that they can’t do it on labor cuts alone and decide to raise prices to pick up the slack. Inflation will kick in, and that meager paycheck just won’t buy the things it used to.

To put it in layman’s terms, you raise the minimum wage and you inevitably decrease the amount of money coming in (because of the cuts) to families who depend on it, and you drive up prices (because of the increases that eventually come) so that these same families can’t afford to buy the things they use to be able to afford.

Seems like one huge step backwards, doesn’t it? That’s because it is. But I’m sure when they look at their paychecks and wonder what happened to their wages, they’ll rest comfortably in the knowledge that at least the Democrats meant well.

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