Soaring minimum wages in states like California have a disproportionate effect on businesses that employ low-skilled labor. The farming industry is among the hardest hit with substantial labor inputs required to perform low-skilled tasks like harvesting, pruning and weeding. The problem (or opportunity depending on your perspective), of course, is that higher labor costs make returns on capital projects that much more enticing.
For our political friends that focus more on the narrative of providing a “fair wage” and not so much on the math, please see below for a very simplified example of why minimum wage hikes ultimately just lead to the permanent unemployment of the people you’re trying to help. In our simple example we assume that a $1mm capital investment, on the purchase of a couple of robots for example, can replace the work of 5 people. Using California’s 50% increase in minimum wage (the “Fair Wage Act of 2016″…don’t you just love the branding) would drive the payback period of such an investment down from a “marginally attractive” 10 years to a “no-brainer” 6 years.
And thus, 5 people find themselves out of a job. But that’s ok, just more people to be dependent on the Nanny State who can easily be brainwashed into believing their plight is the direct result of “rich people” not “paying their fair share” rather than the misinformed policies of our math-challenged political elite.
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US States Minimum Wage Law Delights ‘Liberal’ Because They Are Stupid
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Unemployment falling? The Great Statistical Con Trick
Globalisation can work, but only with a unified international plan says Will Hutton. WRONG!We need global economic and social institutions working across national borders economist Will Hutton who now appears to have been re educated and started working for The New World Order argued recently. If only it were that simple. Unfortunately globalization is the enemy not the trigger of the kind of economic recovery we need.
No Jobs For The Masses In The New Economy Despite University EducationNo matter how leaders like David Cameron and Barack Obama try to talk up their economies or assure voters the jobs market is improving, growth returning and unemployment will soon start falling, the truth is change does not equal progress and forcing the pace of social change has only masked the true depth of economic and social problems. One of these is unemployment and particularly joblessness among the young. Even a university education does not provide a guaranteed career path.
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