Why $15 Minimum Wage Won't Work - What You Need To Know

The only way to get $15 an hour is to earn more than $15 for the company. Find out why...
Part of the unemployment problem in America is a lack of understanding why people are hired in the first place.
Part of the unemployment problem in America is a lack of understanding why people are hired in the first place. | Source

When I ask people what is the purpose of their job, they usually answer... "To support my family."

They either misunderstand the question or they don't know why companies hire employees in the first place.

It should be no surprise that it's to benefit the employer. Their emphasis is always on increasing their revenues.

Here's a simple rule:

If an employee does not bring in more revenue than they are paid, then they are useless to the company. The boss hired them as an investment, and that investment needs to be profitable.

Many People Don't Understand Why They Are Hired

I have spoken to a few people who are out of work and who have received job offers. They turn the offers down and I ask why. They tell me the pay is too low and they deserve more.

They say they won't work for less than what they think they deserve. When I hear that, I ask them what the value of their work is on a per-hour or per-day basis. I never get a straight answer. They simply don't know.

Then I ask them if they feel they can make more money for their company than they are asking for in salary. Some people didn't even understand the question. They think I'm crazy for suggesting that they should give more to their employer than they would get in salary. They feel it's owed to them.

I wonder where that idea comes from?

Another experiment I try is asking people to evaluate their own performance on the job. And I ask them if they feel they are compensated well for their performance. I am shocked to hear some people tell me that they don't want to work harder until they get paid more.

It doesn't work that way! I have hired people in the past, and I consider it an investment in the company. When an employee's job performance brings in more than their compensation, I give them a raise. Raising the minimum wage isn't a solution. If the minimum wage is greater than the value the employee can achieve for the company, then they will not be hired.

Facts About the Minimum Wage

People who demand a $15 minimum wage are clueless. They don’t understand the only way to be paid $15 is to do a job that earns more that $15 an hour for the company.

Many people don’t understand that they are hired as an investment for the firm. If the investment does not produce more return than the cost of the employee, then the investment (i.e. the employee) is eliminated.

Simply asking for more pay without being able to give the employer more results is a losing battle for everyone. What are they thinking? The problem is that the minimum wage advocates (this includes politicians) don't understand how finances work.

I'm afraid we will be seeing a lot of layoffs if the minimum wage is increased. The only real solution, other than automating the low wage tasks, is to educate the employees so they learn to earn more money. Then their salary will increase automatically and there would be no need for an artificial minimum wage.

Why Is There An Unemployment Problem in America?

Many companies are outsourcing to foreign countries instead of hiring our own citizens. They could keep the money in the U.S. by using the resources we have right here. They do want to hire. They do have work. But they also have a profit and loss balance to consider.

The other day I called a particular company for support of their product I had purchased. I was connected to a support rep. I asked the lady where she was located as I detected an accent. She said she is in India.

The technology we have today allows overseas hiring of business support personnel to handle customer's phone inquires. The problem with this is that the jobs are not being given to American Citizens.

I understand that customer service companies are cutting costs by outsourcing these jobs. But they are adding to the unemployment problem and they are negatively affecting our economy.

The next time you are helped by customer support on the phone by a rep of any company you do business with, ask the attendant where they are located. If they're not in America, write a letter to the CEO of the firm expressing your concern that they are doing an injustice to America by adding to the unemployment problem.

This may not actually help much because they still have to make sure they have a profit with their business. There is another side to the issue -- that is: how much value they get from each employee in return for the salary they pay.

Understanding the Reason Why Employers Hire People

On one side of the coin I agree with the Occupy Wall Street protesters who complain that big business is destroying our country. I agree with a specific part of that argument... Big business has the money to lobby for their own special interests. And they get what they want because the politicians get money from them.

The things they want are not necessarily the best deal for the economy as a whole. The government should not be influenced by lobbyists alone.

I think that lobbying for anything should be made illegal without giving the same level of support to everyone else who wants to be heard.

One needs to be willing to show what  he's worth. Occupy Wall Street protesters are not doing that.
One needs to be willing to show what he's worth. Occupy Wall Street protesters are not doing that. | Source

On the other side of the coin, however, I feel very strongly that people who are out of work need to understand the predicament they are in...

They need to accept the fact that the longer they remain out of work the more they will become unemployable at their previous salary. The company who hires them still needs to see a profit from the investment in that person.

Let me explain. A company hires a person for one reason and one reason only. It's an investment. And just like any investment, they expect a profitable return on their investment. When they see a profit they will eventually give those raises.

If they can't get more back than what they pay in salary to an individual, then there simply is no reason to hire that person.

An Example of a Great Return on Investment in Employees

When I first started my own business, long before the Internet was available, I contracted the services of a company to fold leaflets and stuff envelops to do my mass mailings of advertising literature.

The cost was amazingly affordable and I found out later the reason why. They hired people with disabilities to do the work.

I was told that the law allows paying below minimum wage for the handicapped. At least these good people who have integrity and intelligence can get work. Their only limitation is what their disability imposes. With whatever capabilities they have, they use it to get employment.

Unemployment Solutions

A lot of people have been out of work for a long time. Young graduates trying to find their first job are finding it difficult in this economy. Experienced baby boomers who had been laid off can't get back into the job market.

Employers feel that many unemployed workers are unskilled by now for lack of activity in their line of work. It’s unfortunate but they may just have to start over proving what they are worth to a prospective company.

I am disappointed to see that companies like Citibank are hiring workers in India and other foreign countries when we have perfectly good workers right here in the U.S. There are so many unemployed Americans because companies find cheaper employment out of the country.

I just argued that corporations need to show a profit and no one should complain about that. But how about it if those companies try to find solutions that still leave a profit by hiring Americans.

There has to be some common ground. Maybe a little more cost in paying salaries, and a compromise with personnel understanding that they need to start again somewhere and show that they are worth it.

Starting Over Again

Disabled workers can do telephone support. Other workers, such as the people I have interviewed, who are not disabled, can work for less -- just to get back into the workforce.

Once they’re working again they'll have a chance to show their worth and get those promotions and raises. If they truly believe that they are worth it, they should take the opportunity to prove it.

I guess I am biased because I've heard too many people tell me they won't work hard until their boss gives them a raise. It just doesn't work that way. They have to show they are earning more money for the company first. The management needs to see a return on their investment. Then they will want to give a raise just to keep the profitable employee with them.

So there you have it. I know I may get a lot if flack for this. But I feel just having a clear and accurate understanding of why people are hired in the first place can eliminate a big part of the problem.

But there are indeed legitimate problems with corporations too. It's not just capable workers who want more than they deliver. Big corporations need to straighten out their act too.

Eliminate Bailouts

Another thing that I feel has hurt our economy are the fraudulent companies who continue to pay huge salaries to CEO's who have failed to make the company profitable.

If a company can't do business in a profitable manner then they should not continue to exist. That's just putting a strain on the economy.

Investors who bought stock in companies like AIG have lost their money. It was a mistake in my opinion to bail them out. An worse, to bail them out a second time when they gave the initial bailout money to the CEO's who haven't done anything to make a profit to begin with.

Remember what I said that hiring people is an investment? Well that goes for the CEO's too. The salary the company pays these top managers is an investment. If they fail to make a profit, they should not get more than they made. That has to change and out government should not be rewarding companies who fail to understand this simple rule.

It's not Wall Street that wrong. It's specific companies that reward unsuccessful management and who force politicians to favor their special interests.

How To Get Companies Hiring Again

Companies should be rewarded for training employees on the job.
Companies should be rewarded for training employees on the job. | Source

Our government has fouled up the whole system. But now they need to help companies reconsider hiring from within our own country.

Corporations have to take the responsibility to help fix the problem just as much as the government does. We are all in this together. Corporations should consider the fact that they may need to provide training to bring new hired personnel up to speed.

And the government needs to motivate them to do that by offering a waiver on the employer's half of Social Security (FICA) payments when they hire an American Citizen and start them off with paid training. Presently the employee pays 4.2% through FICA withholding and the employer pays 6.2% FICA tax.

This will motivate companies to hire additional personnel even if they don't start off having a complete knowledge of the work.

Even in a bad economy that has all the problems created by the mistakes our government made, I see no reason why any company in their right mind would hesitate to hire more workers if they could see a return on their investment.

© 2011 Glenn Stok

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Reader Comments 13 comments

gmwilliams profile image

gmwilliams 5 years ago from the Greatest City In The World-New York City, New York

This is an excellent hub. You have elucidated many excellent and insightful points.

Erin Boggs1 profile image

Erin Boggs1 5 years ago from Western Maryland

You have made so great points in this hub, now if only we could congress and so big business to read your hub...and the people that feel they are too good for certain jobs too.

Glenn Stok profile image

Glenn Stok 5 years ago from Long Island, NY Author

@gmwilliams - Thanks for being the first to read and comment. I appreciate the high standing you gave it.

@Erin Boggs - Yes, I think everyone who writes hopes that their efforts will catch the attention of those who can make changes. Thanks for reading and for your kind comments.

Fuller-Life profile image

Fuller-Life 5 years ago from Washington, DC

Excellent layout of the argument Glenn. I agree with you on the need to try to employ Americans. But if Americans can't accept lower but reasonable pay, I don't see any justification why a company can't outsource. Also, I think it's wrong to underpay disabled people when they can do administrative work just as well as the able bodied. I'm convinced that profit is as much a moral issue as it is political.

Glenn Stok profile image

Glenn Stok 5 years ago from Long Island, NY Author

@Fuller-Life - Very good points you made. That may very well be part of the problem... Americans don't take those jobs so they get outsourced to other countries. As for lower pay to the disabled, I think the reasoning is that their disability slows them down. So the payment still needs to be in line with the quantity produced. At least they appreciate the dilemma and accept it.

ktrapp profile image

ktrapp 5 years ago from Illinois

I think an additional issue is the cost of benefits which is a huge cost to businesses, making it more affordable to outsource. And because the cost of living for Americans is so much higher than in places where outsourced workers live, it makes it difficult for Americans to accept jobs that just aren't enough to pay the bills.

I also know several people in the IT field and they have told me that they try to hire locally for their American firms, but they hardly even get any applicants. So, in many instances they have no choice but to outsource. I think the blame for this may be with the education system in the U.S.

Glenn Stok profile image

Glenn Stok 5 years ago from Long Island, NY Author

Ktrapp - Thank you for expressing these additional issues. I have to totally agree with you. The entire picture is more complicated than any single item. The issues you mentioned are definitely part of the problem too.

ktrapp profile image

ktrapp 5 years ago from Illinois

Like most problems in this country, when you start to peel away the layers to get at the root cause of the problem, in this case outsourcing, you realize there are multiple failures that have resulted in the problem. And some of these causes may have started years before the problem, making it difficult to unravel.

I for one, just wish it would all get fixed. I think our education system is lagging, but the cost of a college education is absurd; our healthcare costs have skyrocketed, yet we seem sicker than ever; as a nation and world we embraced the internet and technology, yet as unemployed Americans we lament that people a world away can take our jobs. I think outsourcing is a big conglomeration of unanticipated problems from years past, and fixing it is going to be difficult.

Glenn Stok profile image

Glenn Stok 5 years ago from Long Island, NY Author

ktrapp, Education and Healthcare are both broken and need to be fixed. It's sad that these things are left to deteriorate in a country as great as America. It won't be great for long if these problems aren't fixed soon. You're so right that these two things also affect unemployment.

homesteadbound profile image

homesteadbound 5 years ago from Texas

This is a great hub. And you are so correct, and Ktrapp also, education is a big problem. I have looked for a job, and they are hard to come by. Sometimes it's hard because I'm not given a chance (I think) because I am over-qualified. I hate when they ask how much I have made, because I have been willing to take so much less, but fel I have not gotten the chance. Just my two cents!

Glenn Stok profile image

Glenn Stok 5 years ago from Long Island, NY Author

homesteadbound, Thanks for adding that additional info. That is indeed another problem we can add to the list of issues... That people are considered over-qualified based on their previous position. I respect you for willing to take a lower paying job. I have spoken with so many who refuse to take offers because they feel they deserve more. I'm not doubting that they do. But I feel it's better to take a job at less pay if it will help pay the bills. And it will hopefully lead to a raise when things improve.

Well, good luck to you. I hope you find something soon. And thanks for reading and commenting.

Fuller-Life profile image

Fuller-Life 4 years ago from Washington, DC

Glenn, I don't think politicians are uneducated and lack the knowledge to do things right- They are. They know what to do, but they wont do it. They care more about being elected. Look at how they are fighting funding towards education and health? It's because they can afford private surgeons and send their children to better schools and international exchange programs, that they don't care about the rest of us. I have never seen any developed country that doesn't invest in infrastructure that is able to stand for long. We are in trouble with this ill founded ideological fight!

Glenn Stok profile image

Glenn Stok 4 years ago from Long Island, NY Author

Fuller-Life, I agree with you that politicians are focused on being reelected. That's the main reason why they don't do things right. But I am also thinking that if we had a businessman or businesswoman in the white house, they would know how to fix the economy. But who knows, even a business understanding may be put aside if they just want to be reelected. You do have a point. It's sad, Isn't it?

Thanks for reading and adding your insightful comment.

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