Thread by @finance_hipster

I NEVER expected #minimumwage to be a controversial topic on Wealth Twitter.

Yesterday I had someone curse me out, tell me I’m useless, and flip me off (virtually).

So in their honor, let’s do a mini-thread!

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There’s a serious push for a “fair” minimum wage.

But what is fair, and who defines it?

The recent number floated has been $25.

The original fair, was decided by the market. And it largely STILL is today.

Let’s look at the facts

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Hourly workers making federal minimum wage (or less for some exceptions) make up 2-3% of the work force (according to the US BLS).

2-3%. That’s it ✌🏻

IF business was so evil (and profit hungry), wouldn’t MORE companies pay people the minimum they could legally get away with?

But they don’t. Literally only 2-3% do.

Why?

The reason is the market. It dictates what skills are worth + how much a company has to pay for them. These depend on the area, cost of living, and the type of work and profit it can provide.

Best yet, jobs are voluntary 👇🏻

If a company doesn’t pay well, and there are better paying options, workers leave.

Companies seek to attract the employees they want.

Some higher, for more skilled. Some lower, for less.

This creates competition, and allows companies with different models to all operate 👇🏻

Think of a locally owned cafe. They sell coffee — and often rely on college workers/family to run it.

A small business can rarely pay a sum of $25 to serve coffee, with small profit margins.

So they wouldn’t open. That leaves only Starbucks in your neighborhood.

So overall how can a minimum wage be bad?

It destroys opportunity.

❌ Part time workers who want a side gig can’t work for less.
❌ Those wanting to learn while still making some money can’t work for less.
❌ Small businesses with a unique model can’t operate.

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✅ Companies are more likely to innovate to decrease workforce (example McDonald’s computer ordering)
✅ Large corporations are more likely to beat out small businesses who can’t afford higher wages
✅ Companies will eliminate services that aren’t profitable.

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Many point to a higher wage spurring on the economy —

I.E. if people make more, they can spend more.

While this is partly true, it winds up with diminishing returns. The more companies have to pay, the more product costs, the more people HAVE to spend.

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A good example of what if does to cost is 🇺🇸 made products. Everyone knows they cost more — and many avoid buying them due to that higher cost.

Essentially, we could wind up with highly paid but still poor people. That’s not any better than our current situation!

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In sum, why would we make large policy changes based on only 2-3% of the work force?

I don’t think we should.

I FULLY believe we should have a safety net, and we all should help those that need it.

Business should behave well, and we as a market should demand it.

But the majority of businesses decide to behave without overall regulation — see companies increasing their wages (I.e. target, etc)

This allows the opportunity and business creation, and freedom of choice, that we discussed above.

No perfect answers — but my ✌🏻 cents 👇🏻

What can YOU do to help increase wages?

If you think companies are taking advantage of people, don’t give them your business. Support good businesses with your money.

This is the power of money, your money is your power — and the market responds to it

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