When it comes to debates about raising taxes and raising the minimum wage I always hear the argument that businesses will not hire more people or will fire people, thus causing the unemployment rate to go up. This is a complete myth. The demand for workers is set. Let me give an example…
Mike has a sandwich shop. His shop requires two people to run it. He has one person making the sandwich and one person on the register which does prepping in the back during the slow times (also working as the manager.) This is the bare minimum that can handle the customer flow of the shop. If Mike does not have two people, he cannot run his business.
If taxes go up he cannot fire anyone because he needs two people to run his shop
If he has to increase their pay from $50 a day to $100 a day he must do it because he needs two people working.
The amount of employees needed to do a job or run a business is fixed regardless of their wages or the taxes. You either pay the required workers of your fail. All the time when businesses fail owners blame the economy. Watch any of the struggling restaurant shows…they blame the economy, the customers, or the fact they cannot pay a head chef. The reality is 1. Their food sucks 2. Their service sucks 3. They have no idea what their numbers are.
Businesses fail because their product is the problem. Let me quote billionaire entrepreneur Mark Cuban…
Maher (reading question from internet): If the government raised your taxes Mr. Cuban, would you still be a billionaire, still create jobs, and still invest in this country?
Cuban: Absolutely. They can take my taxes from 35 to 39 percent, I won’t even notice it.
Cuban: Here’s the reality. If you have enough money in the bank, your marginal tax rate doesn’t matter. Either you’re investing or you’re not. You’re not making decisions [based on that]. I’ve looked at thousands of business plans. On Shark Tank we see 20 a day. Not one single time have I ever had a discussion about taxes in making those decisions. Not once.
They don’t matter. Either it’s a good investment or it’s not.
Either it is a good investment or it is not, taxes do not matter. It is about running a good business and producing a quality product. Also, if you watch Shark Tank they have NEVER asked what they pay the employees. They have asked what they take as a salary and about sending production overseas, but NEVER how much they pay their employees.
Here is the reality…
You need a certain number of people to run a business. If you employ MORE people than is NEEDED, you are making a STUPID business decision. Why would you hire more people than you need? We may as well flush money down the toilet.
The only argument I can think of to hire more employees than is needed is to help people out or reduce the amount of work employees have. To that my response is, if we are in the business of helping people out, how about paying them a wage they can live off of? People will actually work harder and have a better attitude if you pay them more.
If a company says they HAD to fire people because of wage increases, tax increases, or providing health insurance, they are either LYING or do not know how to properly run a business.
If you want to talk about raising prices, let’s have that discussion, but do not blame the employment rate on taxes or wages.
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