How Minimum Wage Caused 200 Jobs to Evaporate

[Shek]

How Minimum Wage Caused 200 Jobs to Evaporate

ST. LOUIS POST-DISPATCH -- A young St. Louis mother who hand-painted barrettes to tame her daughter's unruly locks, turned the hair accessories into a $6 million dollar business (WeeOnes.com) that sold 2 million hairbows in 2007 and employed 250 workers in Missouri. It's a success story that could only happen in America, right?


Yes, it's a perfect example of starting a business from nothing, and "living the American Dream," except that in October, the company told workers they were closing the plant in Missouri and contracting the work out to a factory in Mexico. One of the main reasons?

High and rising labor costs, primarily from the 37% increase in Missouri's minimum wage from $5.15 per hour in 2006 to $7.05 starting January 1, 2009 (see chart above), which contributed significantly to losses for the company over the last few years. The market for their products is so competitive that the company couldn't increase the price of the bows to offset the higher labor costs without losing sales, so the company was forced to move production to Mexico, and now more than 200 Missouri jobs have evaporated - largely thanks to the minimum wage.


Bottom Line: The workers of Missouri need jobs in today's tough economy more than they need the "compassion" of their state legislators. Unfortunately, for purely political reasons (not economic reasons), Missouri's elected officials have priced some of its unskilled workers right out of the labor market into the unemployment line, and helped ship jobs to Mexico, all because of their "compassionate" annual increases in the minimum wage (now mandated in Missouri).

Question: Which option is better for the Wee Ones workers: Continued employment at $5.15 per hour, or being now unemployed at $0.00 per hour? I bet if they had a choice, they'd take the first option. Unfortunately, that would be illegal.

[Versus]

How Minimum Wage Caused 200 Jobs to Evaporate

That was a bit haste reply.
I don't see how this makes any sense. The govt. increases the minimum wage and the jobs flee to Mexico. So it is the govt. fault cause it raised the minimum wage and made business unprofitable. So increase in salary leads to business disappearance? What a weird situation. But I get the point, the state meddling with the economy leads to disaster.

[Shek]

That was a bit haste reply.
I don't see how this makes any sense. The govt. increases the minimum wage and the jobs flee to Mexico. So it is the govt. fault cause it raised the minimum wage and made business unprofitable. So increase in salary leads to business disappearance? What a weird situation. But I get the point, the state meddling with the economy leads to disaster.

Versus,

I think the article does a good job showing what's often unseen - those that are harmed by minimum wage. However, the minimum wage does a good job of helping those who keep their jobs. On net, the effects on the former outweight the latter.

[Herodotus]

Minimum wage laws are pointless. I keep hearing people say index the minimum wage to inflation but wouldn't inflation just increase canceling out any supposed advantage of the minimum wage. I don't hear anyone arguing for a maximum wage law, or price controls.

Doesn't every worker have a certain value or worth for the work they do? An employer is only going to pay an employee what their work is worth; the market determines that and not the government. Minimum wage laws should disappear.

[Blue]

I've seen many jobs go here in Joplin as well. Many small businesses, fast-food and production jobs as well. Btwn the wage hike and some businesses going belly up because of the financial crisis, our unemployment is up almost a full percentage point which translates to about 240 jobs in a town of about 45,000. And its rising. Some estimate we could see as much as a 10% unemployment rate, in this area, by 2010 if at least some of these factors are not curtailed.

Special thanks go out to Teddy and the Democrats who engineered and pushed for the national increase. And another big thank ya much to Missouris own legislature for keeping it higher than the nat'l level. Here we are seeing many businesses going to Kansas and Arkansas due to the cheaper labor as well.

http://en.wikipedia.org/wiki/File:USA_minimum_wage.gif

[jame$thegreat]

In New York minimum wage went up from $6.45 to $7.10 in 2007. That's what I make.:(

[ying]

It is not the fault of minimum wages law. Even if there is no minimum wages requirement, some Americans still will lose their job since there is always someone else who would like to sell his labor at much lower price even in the States. The “race to bottom” is born with the capitalism and will become terrible if there is no minimum wages restraint. Minimum wages encourages people to compete in the labor market by showing how creative they are and how much added value they may bring instead of showing how cheap their labor is.

We had the same debate in China. China issued new labor contract law in 2007 and enhances its enforcement of minimum wages which are obviously forcing some foreign investors to leave China due to the increase of labor costs. But this is the right thing we have to do.

[Herodotus]

It is not the fault of minimum wages law. Even if there is no minimum wages requirement, some Americans still will lose their job since there is always someone else who would like to sell his labor at much lower price even in the States. The “race to bottom” is born with the capitalism and will become terrible if there is no minimum wages restraint. Minimum wages encourages people to compete in the labor market by showing how creative they are and how much added value they may bring instead of showing how cheap their labor is.

We had the same debate in China. China issued new labor contract law in 2007 and enhances its enforcement of minimum wages which are obviously forcing some foreign investors to leave China due to the increase of labor costs. But this is the right thing we have to do.

I have seen conflicting stats on who exactly earns minimum wage, but let's start with the US Dept. of Labor:

According to Current Population Survey estimates for 2006, 76.5 million American workers were paid at hourly rates, representing 59.7 percent of all wage and salary workers.1 Of those paid by the hour, 409,000 were reported as earning exactly $5.15, the prevailing Federal minimum wage. Another 1.3 million were reported as earning wages below the minimum.2 Together, these 1.7 million workers with wages at or below the minimum made up 2.2 percent of all hourly-paid workers.

Mmmm; as of 2006 409,000 workers out of over 125 million+ total in labor force actually earned the exact minimum, 1.3 million earned less. That was right before the increase. Oh yeah, a quarter of those were teenagers.

According to this table: http://www.bls.gov/cps/minwage2006tbls.htm#10 the proportion of workers earning minimum wage since the last increase (1997), has gone done every single year from 8.3% of the hourly paid workforce to 2.2%, and that's less than 1 percent of the total work force.

So what is the advantage to having a minimum wage law when it only affects 400,000 workers, keeping in mind that there are exemptions to the minimum wage laws, and also that this number quite possibly includes waitstaff, bartenders, and other restaurant workers who receive tips in addition to their below minimum wage, which increases their salaries.

Here is the full PDF file: http://www.bls.gov/cps/minwage2006.pdf

[Shek]

The “race to bottom” is born with the capitalism and will become terrible if there is no minimum wages restraint.

So why do capitalistic countries enjoy a higher standard of living than other countries? Does not compute.

[gunnut]

In New York minimum wage went up from $6.45 to $7.10 in 2007. That's what I make.:(

Many cities in California (Santa Monica for one) has what is called "living wage" law in the books. The "living wage" in Santa Monica is something like $10.25 per hour. Only the most profitable businesses exist in Santa Monica.

You make minimum wage because you're young and probably working part time on non-critical work requiring minimal skills.

I worked for $7/hr when I just got out of college. Slowly, more doors opened up and my pay went up considerably. My pay goes up when I change jobs. That's how it should work. We shouldn't make more doing the same.

[jame$thegreat]

You make minimum wage because you're young and probably working part time on non-critical work requiring minimal skills.

I worked for $7/hr when I just got out of college. Slowly, more doors opened up and my pay went up considerably. My pay goes up when I change jobs. That's how it should work. We shouldn't make more doing the same.

True. I work as a veterinary assistant part-time and I am 17.

Indeed. I don't enjoy making minimum wage, but I realize that we must all start somewhere. The fact of the matter is, if you are not willing to go to school and better yourself then you do not deserve to make much more than minimum wage.

[Blue]

True. I work as a veterinary assistant part-time and I am 17.

Indeed. I don't enjoy making minimum wage, but I realize that we must all start somewhere. The fact of the matter is, if you are not willing to go to school and better yourself then you do not deserve to make much more than minimum wage.

James, the more I read of you, the more I realize you seem like a squared away young man. I think you have a promising future ahead of you. Unfortunately, I know 30 year olds that could not grasp what you just said. You will most likely be in charge of them someday.

[GraniteForge]

I have worked for sub-minimum wage, something that is fairly common in certain industries, along with ignoring health and safety regulations. Sadly, the most successful businesses are often run by the least law-abiding individuals.

[Blue]

When I was a Deputy I figured my hours worked against my salary and I sometimes made just a tad more than minimum, which at the time, IIRC was either 3.25 or 4.25 an hour. Whatever min wage was in Kansas in '91?

[GraniteForge]

When I was a Deputy I figured my hours worked against my salary and I sometimes made just a tad more than minimum, which at the time, IIRC was either 3.25 or 4.25 an hour. Whatever min wage was in Kansas in '91?

I remember my first paying job: Hay labor. I was 8 years old, and I earned $2/day. It was hard work; I really earned my pay. But they also fed me very well, and I slept in the barn, warm and dry. I worked a long, long day, but the pay was pure profit, and for an 8 yr old in the mid '60s, it was real money.