Businesses Decry Illinois Minimum Wage Increase

Rip Van Winkle (artist unknown) composited with
JonasDeRo's Ruined New York 

Illinois Governor JB Pritzker signed into law recently a state minimum wage increase to $15 per hour over a period of several years, during which inflation will keep up, rendering this action nothing more than just a political ploy.

Ideally for Springfield, Illinois alone this is alleged to affect the wages of over 36,610 people who currently earn less than $15 per hour.

If the minimum wage was pegged to inflation since it's inception, in today's dollars it would be over $23 per hour anyway. If the minimum wage was pegged to productivity we probably wouldn't have so much inflation.

So businesses trot out their pundits with the stale threats that they would do the following which have consequences:

• Leave the state of Illinois
• Start over from scratch somewhere else with build-out expenses and zero regular customers in an area potentially already occupied by competitors? Not likely.
• Close their businesses
• And do what? Find a Job? Not likely.
• Lay off their employees
• And sacrifice customer service, quality production and morale? Not likely.
• Cut their employees hours
• Already working with a bare-minimum staff, just how much more efficient can you get beyond replacing your full-time workers with only part-time workers?

Another stale argument is that minimum wage jobs are meant only for young students getting entry level experiences. Well I have news for you Rip Van Winkle, those jobs are not as upwardly mobile as they once were after World War II up through the 1970's. According to the Bureau of Labor Statistics (BLS), Food prep and retail workers represent the largest group of employees earning less than $15 per hour and the median age is 37.

So for businesses planning on leaving the state I recommend the following GIF:

via GIPHY

Robot Minimum Wage Workers

Business who happily replace minimum wage workers with robots probably won't need to worry about local tax increases needed to subsidize unemployment, low-income nutrition and housing programs. That comes out of the pockets of the franchise owners.

Businesses really have two choices: They can know to whom their money goes when they pay a living wage, or they can not know to whom their money goes by paying higher taxes.

They complain about government regulation and taxation, but they can't understand that they and their predecessors earned it through their avarice.

Now about Wendy's:

• Tech Insider: Wendy's is replacing its lowest-paid workers with robots
• RedState: The Minimum Wage for Robots is Zero so Wendy’s Hires a Bunch
• Government Slaves: Wendy’s To Switch To Self Ordering And Automation To Avoid $15/hr Wage hike
• The Wall Street Journal: Another Minimum Wage Backfire Wendy’s explains what mandated wage hikes do to jobs at burger joints.
• MarketWatch (June 2015): Wendy's shares surge on news of $1.4 billion buyback, long-term outlook
• Current MarketWatch data on Wendy's: http://www.marketwatch.com/investing/stock/wen

A Sign of Things to Come

When I look at economic news, many sources in the main-stream are are ambiguous to my frustration. I want to point at a news report and say "See, this is why the minimum wage should rise to meet inflation!"

Just take a look at today's Reuters ( 06/16/2015 ), for example:
http://www.reuters.com/
It seems like things are doing about average, doesn't it? The Pope is talking climate change, Greek default fears are affecting Asia, Hillary is getting tough on trade, oh, and Gap is closing 175 stores. Well, that happens from time to time. It must be a problem at Gap, right? Nope.

If the market took to heart the idea that consumers must earn more money to spend more money, and the market kept wages pegged to inflation, it wouldn't be too late now.

There is no longer a margin that will allow for the delay between a wage increase and a following increase of consumer spending.

Austerity as a solution is a complete failure. Closing stores, laying off employees, cutting government spending, all have one result: Less consumer spending.

If the minimum wage were to increase to the inflation adjusted $22 per hour, consumers are so conditioned by the way the market treated them as employees that their first instinct will be to sock away their money in their savings and checking accounts.

Consumers  have been so conditioned to be miserly after 30 years of Reaganomics, the flow of cash will bottleneck in consumers wallets, banks, and debt relief, before finally reaching any discretionary outlays,

See for yourself what Reaganomics has wrought:

Weak Consumer Spending: The Canary In The Bear Market Coal Mine
http://www.valuewalk.com/2015/06/weak-consumer-spending-the-canary-in-the-bear-market-coal-mine/

Will Weak Consumer Spending Deflate Stock Markets?
http://seekingalpha.com/article/3231596-will-weak-consumer-spending-deflate-stock-markets

When will the consumer spending surge finally happen?
http://theweek.com/articles/558861/when-consumer-spending-surge-finally-happen

Gap is closing 175 stores and firing a bunch of people
http://www.businessinsider.com/gap-closing-stores-and-laying-off-workers-2015-6

Sears Extends Losses as Sales Declines Accelerate
http://www.wsj.com/articles/sears-holdings-sales-swoon-continues-though-profit-improves-1433759875

Kmart's sales have fallen off a gigantic cliff
http://money.cnn.com/2015/06/08/investing/kmart-sales-decline-sears-eddie-lampert/

Canada’s factory sales drop four times more than expected
http://business.financialpost.com/news/economy/canadas-factory-sales-drop-four-times-more-than-expected

Hyundai, Kia cut output in South Korea after sales decline
http://www.autonews.com/article/20150612/OEM01/150619949/hyundai-kia-cut-output-in-south-korea-after-sales-decline

Existing-Home Sales Decline 3.3% in April
http://www.wsj.com/articles/existing-home-sales-decline-3-3-in-april-1432217164

Audi China car sales drop for first time in over two years in May
http://economictimes.indiatimes.com/news/international/business/audi-china-car-sales-drop-for-first-time-in-over-two-years-in-may/articleshow/47675415.cms

McDonald's Sees Global May Sales Decline, One Region Shines
http://www.zacks.com/stock/news/177541/mcdonalds-sees-global-may-sales-decline-one-region-shines

Arrium flags asset sales, declining earnings
http://www.dailytelegraph.com.au/business/breaking-news/arrium-flags-asset-sales-declining-earnings/story-fnn9c0gv-1227398179070

Single-family home sales down in May
1st dip for metro Toledo since 2014
http://www.toledoblade.com/Real-Estate/2015/06/10/Single-family-home-sales-down-in-May.html

Tata Motors Hits 52-Week Low as JLR May Sales Decline
http://profit.ndtv.com/news/market/article-tata-motors-hits-52-week-low-as-jlr-may-sales-decline-770974

J. Crew to lay off 10% of headquarters after horrific sales decline
http://fortune.com/2015/06/10/jcrew-layoffs/

Kors Shares Plunge 19% On Weak Outlook And Same-Store Sales Decline
http://www.forbes.com/sites/maggiemcgrath/2015/05/27/kors-shares-plunge-19-on-weak-outlook-and-same-store-sales-decline/

First time in 20 Years, Indian mobile phone sales drop
http://www.moneylife.in/article/first-time-in-20-years-indian-mobile-phone-sales-drop/41788.html

Jaguar Land Rover Profit Falls Most in Two Years on China
http://www.bloomberg.com/news/articles/2015-05-26/tata-motors-net-misses-estimates-as-jaguar-land-rover-sales-drop

Staples reports 39% decline in profit as sales dip
http://www.marketwatch.com/story/staples-reports-39-decline-in-profit-as-sales-dip-2015-05-20

Ford F-150 Sales Tank in May
http://247wallst.com/autos/2015/06/02/ford-f-150-sales-tank-in-may/

PC sales in Middle East, Africa region dropped 9.6%
http://gulfnews.com/business/sectors/technology/pc-sales-in-middle-east-africa-region-dropped-9-6-1.1534980

U.S. Industrial Production Falls on Weak Demand, Strong Dollar--Update
http://www.nasdaq.com/article/us-industrial-production-falls-on-weak-demand-strong-dollarupdate-20150615-00769

Factories Meet New Hurdle in U.S. Consumer Spending Slowdown
http://www.bloomberg.com/news/articles/2015-06-01/factories-in-u-s-expand-more-than-forecast-on-stronger-orders


At this point I just gave up and posted the Google Search links.


---- Google Search Link: "consumer spending weak"
https://www.google.com/search?num=100&newwindow=1&biw=1600&bih=785&tbm=nws&q=consumer+spending+weak&oq=consumer+spending+weak&gs_l=serp.3...70426.74445.0.74990.22.15.0.7.7.0.120.959.14j1.15.0....0...1c.1.64.serp..4.18.776.SfhMLvYytLI

---- Google Search Link: "sales decline"
https://www.google.com/search?num=100&newwindow=1&biw=1600&bih=785&tbm=nws&q=sales+decline&oq=sales+decline&gs_l=serp.3..0.1120660.1122341.0.1122722.13.9.0.4.4.0.110.553.7j2.9.0....0...1c.1.64.serp..0.13.552.fmVibMKwNek

---- Google Search Link: "stores closing"
https://www.google.com/search?num=100&newwindow=1&biw=1600&bih=785&tbm=nws&q=stores+closing&oq=stores+&gs_l=serp.3.0.0l10.34886.36994.0.39496.9.8.1.0.0.0.138.615.6j2.8.0....0...1c.1.64.serp..0.9.617._4Fw6u5eXwo

Minimum Wage increase and population growth

The Associated Press (AP) reported "Lower-paying industries led 2013 US job gains" but at what cost? The "Supply-siders" use these numbers to argue against increasing the minimum wage because "higher labor costs will force employers to lay-off employees."

People who make claims like this are thinking like accountants instead of economists because they don't look beyond the payroll to the local community where an increase in the flow of money to businesses could increase by at least twice what is currently being spent. With increased wages comes more customers. The demand will require additional employees and businesses.

My next question is this: If there is a sudden surge in the economy from a wage increase, will the unemployment rate shrink, stay the same or get worse because people will think it's safe to have more children again?

Population numbers might interfere. It's far easier to increase the size of a population than it is to reduce it, at least during peace time. The consequences of the post-second world war baby boom are still being felt, mitigated only by the Roe v. Wade Supreme Court decision that made abortion legal just a decade after president Linden Johnson proposed a War on Poverty.

I was conceived irresponsibly a few short months before LBJ proposed his war on poverty in his January 8, 1964 State of the Union Address. I was given up for adoption. This about a decade shy of the Roe V. Wade decision. If I had been conceived after Roe, I might not exist at all.

Unless something is done to stave off the next population explosion that will follow a minimum wage increase, we will end up in the same situation. Hopefully the Affordable Care Act will give everyone who needs it, access to birth control since they don't seem to have much self-control.

Gas prices too high for low-wage commuters

Gas prices have exceeded the maximum amount necessary to allow for minimum wage earners to commute to bedroom communities to work.

As an employee paid only $8.25 per hour, my taxes withheld bring my net hourly wage down to around $6.20 per hour. I work in Jacksonville, Illinois, but rent there is too expensive so I live with my mother in Springfield. Unfortunately, gas prices have gotten so high that I may need to terminate my own employment because I can no longer afford to commute all the way to Jacksonville to work. It has become cost-prohibitive to commute to Jacksonville from Springfield, and back every day.

Unfortunately, I was recruited from Springfield because my expertise is too specialized. The previous employees of my skill set who worked for my employer and lived near enough, have all been fired, quit, or were recruited by more appreciative employers.

There's nothing left at the bottom of that barrel to scrape.