GMU economist Don Boudreaux republishes a note from one of his blog readers, a 28 years old entrepreneur from Charlotte, North Carolina. The entrepeneur’s small business employs 25 people, 21 of whom are low-skilled workers, and he recently sent them this memo:
To All Team Members:
The schedule for next week has been posted. You may notice that hours have been cut back on your schedule. This is across the board, not just you. I don’t want anyone to think they’ve done something wrong to deserve a cut in hours, so I wanted to explain why it’s happening.
1) May and September are very slow months for our business.
2) The recent increase in the minimum wage to $7.25/hour. Since we’ve opened, I’ve had a lot of people ask why they can’t get more hours, and it’s a great question.
I would LOVE to give everyone all the hours they want, and then some. Our customers would be happier across the board, we could accomplish much more every day, our business would grow, I could hire even more people, and on and on. However, ... our labor cost (the total amount you are all paid) must stay below a certain percentage of our total sales. If it doesn’t, we go broke and everyone loses their jobs.
... If I’m forced to pay everyone 40% more, I can’t afford to schedule as many employees for as many hours, since our sales aren’t going up by 40%.
(Note: Boudreaux points out the "40-percent increase in the national minimum-wage seems to refer to that wage’s increase since 2006.")
It's laudable for an employer to explain to his employees in such detail why their hours are being cut. His note reveals the limits of legislation. We cannot legislate prosperity. When we increase minimum wages by legislative fiat, we kill jobs. Government creates nothing but what it has first taken away.