- The Keynesian myth of mandating prosperity actually hurts the lower middle class and the working poor
- Something for nothing is appealing to voters, so politicians make empty promises that are good politics but bad economics
- A Seattle-based company called Gravity Payments has instituted a minimum salary of $70,000/yr
- This has given him great publicity, but how will this work in his company?
- Lower paying jobs will have to be eliminated, because they don’t represent enough productivity to justify a raise that doubles the employee’s cost
- Higher salaried workers are not hurt because they keep their job and perhaps get a raise for picking up the extra duties formerly handled by lower-salaried workers
- The most recent political gimmick in the State of Connecticut is a tax masquerading as a minimum wage law
- The Democratic State Legislature have proposed a law that will fine companies of 500 or more employees $1/hr for any worker who is paid under $15/hr
- How will this work in the State of Connecticut?
- Right away, business just over 500 employees will pare down to fall under the new regulation, so jobs will be lost
- In reality, this is just a tax increase on the people who can least afford it
- For employees who are currently working at the minimum wage, a $1 fine is cheaper than a raise from the current $9.15 rate to $15/hr, if they do not eliminate that person’s job
- This is essentially another employment tax that will result in higher prices across the board
- Neither the employee nor the employer benefits
- For employees who are working above the current minimum of $9.15/hr a raise would cost the employer more than the $1 fine
- According to minimum wage law, it is illegal to cut the worker’s pay – the only option is to cut the worker
- The penalty does not apply to higher paid workers; it only applies to jobs between the current minimum wage and the new minimum wage
- It will be cheaper to pay the tax than to raise wages, but there will be less money to to toward employees because a large percentage of the workers’ wages are going toward a tax
- The reality of this new law, championed for the “little guy” is that the working poor will pay a higher marginal state income tax than the richest hedge fund managers in the state
- Will the voters be able to figure it out elected officials are going after the working poor?
- This tax will also raise the cost of living, wich also affects the poor more directly
- Packaging a tax to pass off as minimm wage is fraud
Minimum Wage, Maximum Stupidity – Ep 78
Peter Schiff is an economist, financial broker/dealer, author, frequent guest on national news, and host of the Peter Schiff Show Podcast.
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