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Has anyone bothered to notice that by raising the minimum wage, besides eventually lowering buying power, lowering the numbers of people employed it also raises workers into higher tax brackets and the government will happily fleece them of more of the wages through income taxes.

So if a 4 dollar hamburger was made with labor making say $8/hr and that wage was tripled, only the labor portion triples.

An increase in wages also causes an increase in the employers’ expense to employ; over and above just the increase of the wages themselves – anywhere from 30% to 40% - the so called “loaded rate”, the true cost to employ someone. In addition to the employer’s share of Social Security and Medicare, there are Federal and state unemployment taxes (FUTA & SUI) and workers compensation insurance premiums, all of which are based on a percentage of wages paid along with other waged based premiums like basic group term life insurance (GTL) which is taxable to the employee over $50k of coverage.

Then there is overtime pay at 1.5 times the base hourly rate which in California is paid not just for hours worked in a week over 40, but also over 8 hours on any day. California also requires employers to pay out at termination all accrued PTO (vacation) hours at the rate of pay at termination whether that termination is voluntary or for cause. So if I have a terminating employee making $10 per hour with 20 hours of accrued PTO, I have to pay out $200, but if their rate of pay is raised to $26 per hour, that payout now becomes $520. And keep in mind also that value of accrued PTO has to be carried as a liability on the employer’s books and such an increase in on the books liabilities devalues the company’s worth.

So not only will employers do more with less workers (and/or incorporate more “self service” and automation), and utilize more part time workers working under 30 hours a week, they will also eliminate overtime where ever possible and eliminate benefits not required by law, such as company paid life insurance and paid vacations.

Another cost to consider is that if you raise the hourly rate of the lowest paid, the least qualified, most inexperienced or entry level workers to $26 per hour, what will an employer be forced to do with those workers already making $26 per hour? You don’t think they will want to make more than the people they are perhaps training and supervising? If I am a manager or supervisor and I’m not making anymore or just barely more than this new minimum wage, what is my motivation to work for “minimum wage” for doing more than a minimum wage job. It just won’t be the minimum wage workers getting wage increases but it will have to “trickle up”.

Unless of course Ms. Lee is proposing a full out old school Soviet/Cuban/Venezuela full out Communist model of worker compensation where all workers regardless of skill, experience and ability make the very same wage in which case everyone from the CEO down will be paid $26 per hour and no more.

The flip side of these so called “living wage” initiatives is the “why should anyone be entitled make more than a living wage” and I think that is just where this is eventually going.

Of course Ms. Lee and others in the highest ranks of favored political classes will get their special perks and live well. The rest of us will be lined up and shot for gathering firewood to keep our families from freezing or exceeding our monthly bread rations.