Increase Minimum Wage? Increase Your Value

All over the news we are seeing stories of people who believe that minimum wage needs to increase.  Let me be the first to say, that my heart goes out to people who struggle to put food on the table.  I have known many people who have worked several jobs to support their family and I greatly respect those who are willing to work hard to earn a living.

I am writing this article, not to argue that people shouldn't get more money, but rather to offer suggestions to people on how to move themselves from that minimum wage job to something better.

With that said, I believe the argument that minimum wage should be a "living wage" - as the catch phrase refers to it - is quite flawed.  Personally, I don't believe anyone other than a person starting out in an unskilled position should be making minimum wage, but generally speaking, it's their decision to make minimum wage.  There are exceptions to every rule, but after reading this, please let me know if you disagree with that statement.

A living wage is defined, at least in my mind, as a rate at which someone can work a job and make enough to support themselves or their family.  I recognize that with a tough economy it's hard to find good quality, high paying jobs.  Its increasingly more difficult for those without a college education, though even people with advanced degrees are finding it's not as easy to land a career developing job.   I would argue that raising minimum wage would do more to make that worse.

In my college "Business Policy" class, my professor, Max Kline, noted that there are only two reasons why your boss should give you a raise:

1. Inflation kicks in - which means prices go up and therefore you are getting an increase that is equivalent to the cost of living, so you are essentially not making more in buying power, just more in physical dollars.  For example, if you make $7 per hour and based on inflation, the cost of what $7 could buy last week, month or year is now $7.10, then unless you get an increase, you actually have less buying power.  That is a reason for a raise - assuming the employer can't find someone willing to work for $7/hr when you are demanding $7.10.

2. You add value - This is the compelling reason to give you a raise and makes the argument to your boss any easy one from your perspective.

If you are an owner of a business, your motivation is to provide the best quality product or service at a reasonable price to the customer.  The more the customer is willing to pay, the more you are able to charge.  In a down economy, it's tough to raise prices, so business owners look for ways to cut costs.  You see that all over the place with automated cash registers and long lines, because it's cheaper not to hire more people.

Additionally, in my home state of New Jersey, minimum wage was increased and as a result, unions demanded that their employees who are not making minimum wage get a salary increase to make their salary the same dollar amount above minimum wage.  In other words, if minimum wage went up for $7 to $9 and a union worker was making $10/hour then the unions demanded a $2 raise for their employees.  Sounds like a good deal for the employees, but what if the cost is enough that the companies lay off one person, or more to save that money?  Some do better, but more people are out of work.  That isn't progress.

Similarly you want to get the best you can when you are buying something and you also want to pay the lowest price you possibly can.  This means that if the customer isn't willing to pay more then the business owner needs to gain efficiencies.  They can do that in many ways, but related to employees, that means you expect the employee must provide you with greater efficiency or help you add to the bottom line profit in some way.  If that doesn't happen, people lose jobs.

Somehow the notion of entitlement brings about the argument that people should be paid well just for showing up.  In a true free market that isn't the case and shouldn't be.  If you just show up and don't do anything extra, then you should at best keep the same job and at worst be fired and replaced with someone more motivated.  Let's look at an example to illustrate my point.

Let's say that a fast food restaurant owner has employees that can make 100 burgers per hour.  Let's assume that customers buy 200 burgers per hour, then by simple math, the owner needs 2 employees to make burgers. If one employee (let's call him Mr. Slacker) only makes 90 burgers per hour, there is a problem.  In fact there are several problems, because first there will not be enough food to meet the customer demand and second, the employee who is producing more will feel less motivated to continue at their level of production if there are no repercussions to Mr. Slacker.  On the other hand, the other employee (call her Miss Achiever) might see the problem and as a good worker she will pick up the slack and make 110 burgers per hour.

When it's time for a raise, should both get the same increase?   Should Mr. Slacker even remain as an employee?

Miss Achiever should be noticed for her increased productivity and be rewarded with additional opportunity.  Maybe she will be store manager some day if she works hard and learns other aspect of the business.

The key concept here is that if you are making minimum wage, you should be motivated to learn all you can about your job and/or company.  You should be the best employee you can be and look for opportunity to take on increased responsibility and add value to the company.  Suggest ideas for improvement, ask questions to learn more about how the business works.  Most important, ask your supervisors what characteristics they are looking for in an employee who will rise through the ranks in the company.  They will tell you.

If at some point, you learn so much and opportunity just isn't there for advancement at your current company, then go out and get a job that is equivalent to your improved skills, yet will still provide the opportunity for you to challenge yourself and grow as a professional.

When I was 14 years old, I took my first job working at Wendy's.  I earned $4/hr, which was the minimum wage at the time.  After three months of hard work, I was given a ten cent per hour raise.   I didn't believe that was enough, so I went down the road to Roy Rogers and got a job (based on my experience) making $4.25/hour.   After 3-6 months of hard work and accolades from my bosses, I asked for a raise.  When it wasn't given to me right away, I advised that I was going to resign.   The general manager heard about this and said he didn't want to lose a valuable employee, who knew how to make burgers, operate the register, make chicken...etc.  Mr. Woodard told me that they were going to give me a raise and that my new wage would be $4.75 per hour.  Minimum wage was still $4 an hour and now in less than a year I was earning 75 cents more than minimum wage?  Why did they pay me more?  Because I made myself valuable to the organization.   If I stood there doing the bare minimum, they would have accepted my resignation and hired someone else at $4.25/hour.  They paid me more because they saw the value.

There is no reason anyone can't do the same thing.  If you just show up and do only what you are asked to do, then you don't bring extra value to your employer.  If you aren't willing to bring value, why should you be paid more?   Just like you wouldn't pay more for a product that isn't better than a similar one, why will they pay you more to do the same thing someone else will do?   Anyone can smile and say "Welcome to Walmart", what makes you more valuable?