One of the favorite manipulational issues of the Left is that of the minimum wage. Every few years, the unified cry of the Democrat party is that the minimum wage needs to be raised. Upon that word, those in the liberal media dutifully print article upon article about how billions of Americans are starving because they can't feed themselves on the minimum wage. We're showered with sob stories about how these decent, hard working people have a right to the dignity of earning a "living wage".
Of course, business leaders accurately state that raising minimum wage will cause the prices for goods and services to rise, so in just a few months, the new minimum wage will have the same purchasing power of the old minimum wage. Additionally, raising the minimum wage also causes a decrease in the work force, as businesses try to reduce costs to keep their costs as low as possible so that they can maintain their evil, greedy profits. How dare they actually expect to make a return on their investment of time and capital. But, I digress on what will be another post on another day.
At a rally yesterday, our Campaigner-In-Chief made the following statement: "If your member of Congress doesn't support raising the minimum wage, you have to let them know they're out of step, and that if they keep putting politics ahead of working Americans, you'll put them out of office."
Many people believe that the Democrats push minimum wage hikes to rally the uninformed voters to keep themselves in power in the 2014 elections. Others believe that they do so because when the minimum wage goes up, the wages of many union workers go up because their contracts stipulate their pay as a proportion of minimum wage.
Personally, while I know that those are true, I believe that I had an epiphany a few days ago about why they truly want to raise the minimum wage. That reason is to get an increase in tax revenue. "But Mike", you're saying, "most of the people making minimum wage pay little to no income taxes!" And you would be right, they don't pay very much in income taxes. They DO, however, pay PAYROLL taxes. Every person pays 6.2% of their direct pay and 6.2% of their indirect pay in FICA taxes. Also, every person pays 1.45% of their direct pay and 1.45% of their indirect pay in Medicare taxes. (Since we're talking about low income workers, just forget about the fact that these apply to the first $117k of their wages. And yes, the worker DOES pay both parts of the tax, but you've been duped into believing that since your employer writes a check for half of it, it doesn't come from your earnings.)
I know that math can get boring and repetitive, so let's make it a little easier. There are 52 weeks in a year and payroll taxes equal to 15.3% of wages are paid. 15.3% of 52 is 7.956. That means that you can multiply pay by average hours per week by 7.956 and determine annual payroll tax.
Here are some annual payroll taxes based upon our current minimum wage:
$7.25 x 20 hours x 7.956 = $1154
$7.25 x 30 hours x 7.956 = $1730
$7.25 x 40 hours x 7.956 = $2307
Here are some annual payroll taxes based upon the PROPOSED minimum wage:
$10.10 x 20 hours x 7.956 = $1607 (an increase of $453)
$10.10 x 30 hours x 7.956 = $2411 (an increase of $681)
$10.10 x 40 hours x 7.956 = $3214 (an increase of $907)
The person only working 30 hours a week would be paying more in payroll taxes than the person currently working 40 hours a week at the current wage. Now, you're probably shaking your head, thinking that (A) all that money goes in Al Gore's mythical "lock box" to be used for only Social inSecurity and Medicare, and (B) it's only a few hundred dollars, so what difference does it make?
First, payroll taxes get dumped into the general fund, and are spent faster than they are collected. The second is the more important, however. Just for the sake of simplification, let us use the 30 hour worker as the typical example. He or she would be paying $681 in additional payroll taxes. Not a great deal, right? Not individually, but remember, there are 3.6 million workers making minimum wage. Assuming they all work 30 hours a week (many will only be allowed to work 28 due to Obamacare, but again, that's another story) the federal government will see a revenue increase from minimum wage earners of:
$681 x 3,600,000 = $2,451,600,000. That's 2.45 billion dollars in new spending money, all because the caring, considerate Leftists wanted to help the poor and downtrodden.
It doesn't stop there, however. Millions upon millions of people make between the current minimum wage and the proposed minimum wage. They'll not only be raised to the new minimum, but will (rightly) demand to be paid the same proportion above the new minimum wage. That is to say, if I made $1.50 over the old minimum because I had been at a job for a year, then I'd expect to make $1.50 over the new minimum. Just using some assumptions of $12 an hour and 40 hours a week and 10 million workers, that would mean $15 billion in new tax revenue. And don't forget about the guy who was earning $10 or $11 or $12 an hour because they're a supervisor or skilled worker. You better believe that they won't settle for their pay being just above minimum wage.
Additionally, millions and millions and millions of workers make more than minimum wage, and will not settle for taking a de facto cut in our pay. So the people making 2x or 3x minimum wage will demand a raise, or move around to other companies willing to pay them what they are worth. Again, pure assumptions, but let us look at worker making 3x current minimum, or $21.75 an hour. Suddenly, the minimum wage goes up to $10.10, and he's now only making twice the minimum instead of three times the minimum. As we've clearly shown, almost EVERYBODY'S wages will go up, and contrary to what the people who've never worked a day in business believe, prices WILL go up as well. It's called inflation. So, does our hypothetical worker settle for getting a raise equal to the increase in minimum wage? That would be $10.10-$7.25 = $2.85 + $21.75 = $24.60? Or is he going to expect that his pay remains at 3x minimum wage, which would now be $30.30?
Going back to an earlier possible motive for the minimum wage hike, many union contracts do stipulate their contract wages be proportional to minimum wage. All those people will be paying more in payroll taxes.
So in about six months, most employees will have some type of an increase in their wages. At the same time, prices will go up, and their new pay will have about the same purchasing power as their old pay. But the federal government will be receiving billions upon billions of new money to spend.
Fast forward another year and a half to early 2016. The increased revenue has been pouring in for a while now, and guess what. Since the government took in more than they estimated at the time that they passed the budget, the deficit will be less than projected. And all of the coiffed propaganda artists at the alphabet soup "news" agencies will be crowing about how Obama's policies are finally working, and that's why we need to not only continue with a Democrat in the White House, we should give both houses of Congress to them as well.
THAT is why I believe that the Democrats are pushing for a hike in the minimum wage. To increase revenue, and to win elections not only in 2014, but in 2016. If you truly believe that the rich liberals (shouldn't that be a registered oxymoron?) care about the little people, I don't think that you're paying attention. And if you think that the liberals have done all to this great nation that they WANT to do to it, you're sadly mistaken. The fundamental transformation is just getting started..