ST. LOUIS POST-DISPATCH – *A young St. Louis mother who hand-painted barrettes to tame her daughter’s unruly locks, turned the hair accessories into a $6 million dollar business (*WeeOnes.com) that sold 2 million hairbows in 2007 and employed 250 workers in Missouri. It’s a success story that could only happen in America, right?
MP: Yes, it’s a perfect example of starting a business from nothing, and “living the American Dream,” except that in October, the company told workers they were closing the plant in Missouri and contracting the work out to a factory in Mexico. One of the main reasons?
High and rising labor costs, primarily from the 37% increase in Missouri’s minimum wage from $5.15 per hour in 2006 to $7.05 starting January 1, 2009 (see chart above), which contributed significantly to losses for the company over the last few years. The market for their products is so competitive that the company couldn’t increase the price of the bows to offset the higher labor costs without losing sales, so the company was forced to move production to Mexico, and now more than 200 Missouri jobs have evaporated - largely thanks to the minimum wage.
Bottom Line: The workers of Missouri need jobs in today’s tough economy more than they need the “compassion” of their state legislators. Unfortunately, for purely political reasons (not economic reasons), Missouri’s elected officials have priced some of its unskilled workers right out of the labor market into the unemployment line, and helped ship jobs to Mexico, all because of their “compassionate” annual increases in the minimum wage (now mandated in Missouri).
Question: Which option is better for the Wee Ones workers: Continued employment at $5.15 per hour, or being now unemployed at $0.00 per hour? I bet if they had a choice, they’d take the first option. Unfortunately, that would be illegal.
So reducing the amount of her employees, modernizing or looking somewhere else in the USA wasn’t an option? Why? Mexico is the cure all for everything that ails an employer right? The truth is dealing with Mexico is a nightmare. There is the constant bribes, the stealing by employees that disappear and never return. Shipments that get “lost”. Try getting the Mexican police to help you prosecute someone for stealing, not going to happen. Did I forget the constant threat of upper level employees being kidnapped and/or killed?
And what about the Mexican workers? Many work in conditions that should be illegal. Thank God American workers have some kind of safety and health standards.I hope no one is calling for a return to the good old days like Upton Sinclair wrote about.
Let’s revisit this woman’s business in a year and see how well things are going, if she still has a business.
Retailers tend to employ a lot of minimum wage workers. In the current economic downturn, they’re having a tough time and have been doing everything possible to reduce costs. In 2007 the federal minimum wage increased 13%, in 2008 it increased another 12%, and in July of this year it will increase another 11%. The total increase from July 2007 until July 2009 will be more than 40%. One has to wonder, how many retail workers have lost, or will be losing their jobs as a result of the 40% increase to one of the largest expense items those retailers can control? You’re right…I’ll bet their are an awful lot of unemployed people out there that would like to be working for the same wage that they received 2 years ago, rather than be unemployed at the current wage.
I’m sure she would appreciate your due diligence into this matter. Let’s assume you are right for a moment though and this CEO keeps the factory in the US, moving it to another state.
Such an action does absolutely nothing to keep the jobs in Missouri and if the jobs are leaving the state that means more people will be worse off, correct? Isn’t that the opposite of what those minimum wage laws are supposed to accomplish–creating better economic conditions for the states workers?
So even if she stays in this country, Missouri still looses those 200+ jobs because of the minimum wage laws. Sorry, you’re argument is interesting–actually is a different argument–but it does nothing to refute the fact that minimum wage laws price low-skilled workers out of jobs.
The crux of the matter is that scarce capital will flow to where it can be used most efficiently, whether it be a neighboring state, mexico, or some other country.
The sooner you and our lawmakers realize this the better off all workers will be.
Would the manufacturing have stayed in Missouri once the business owner realized she could have the barrettes produce cheaper in Mexico anyways?
That’s a great–but different question. I look at it like this: the woman was making a razor thin return anyways since this is a low-margin product in a competive industry. Without making other assumptions about how well the business was managed, one has to conclude that she probably was already thinking about ways to improve profitability–including moving production elsewhere.
We simply do not know if this is the case though. What we do know is that it was the govnernments hand in the labor market that was the tipping point that led this company–one that has been in the community for 30 years–to move production.
Again, a company with such deep roots just doesn’t up and move unless it is absolutely necessary. They had the last 30 year–or at least back to NAFTA–to look at mexico, so why now?
Point is that without minimum wage the barrets would not be able to be produced in Mexico cheaper. On that basis the workers would decide if they wanted to work for a wage that would match that of the wages in Mexico. If they chose not to then the work would go to Mexico, not because of some arbitrary number set forth by the government.
Who knows, maybe there are 250 people in the area that would want to work for 5$ or 4$ and the cost difference between the 2.50$ in Mexico is not worth it to move at 4 or 5 but is at 7$.
All of the decisions are more efficiently and effectively made by the employees and employers than government.
Not arguing the point at all but it always amuses me when people use graphs starting at some arbitrary point to show a difference. For instance why start this graph at 4$ rather than 0$? Makes the rise look a lot more than it really is, no?
Well let’s also remember why we have minimum wage laws - because historically companies have illegally manipulated the labor market to enforce artificially low wages.
So to say that the market left totally unchecked would be more efficient, is great in theory, but isn’t always the case.
That being said, minimum wage increase decisions were made month is not years ago. So definitely in that respect the market could more naturally adjust to the economy.
Hopefully the CEO discussed the move with her employees and tapped their experience to explore options to have kept the jobs in the US. Maybe there were secondary product uses for the by product manufacturing, other new markets to explore, etc. There’s a specific US clothing brand that is a shining example of this, I’m failing to recall their name though.
Question: Which option is better for the Wee Ones workers: Continued employment at $5.15 per hour, or being now unemployed at $0.00 per hour? I bet if they had a choice, they’d take the first option. Unfortunately, that would be illegal.
why then, following this line of thought, not make the minimum wage $2/hr so we can compete better against 3rd world countries? After all having a job for $2.00 an hour is better than being unemployed, right?
why then, following this line of thought, not make the minimum wage $2/hr so we can compete better against 3rd world countries? After all having a job for $2.00 an hour is better than being unemployed, right?
No need to type that in pink. I agree 100%…better yet, no need for any minimum wage laws. That’s what the free market is for.
So to say that the market left totally unchecked would be more efficient, is great in theory, but isn’t always the case.
Actually saying companies left unchecked would be more efficient is no “Great in theory”, it is actuality. The question is not would they be more efficient, they would be, the question is if them being more efficient and having the most free market is what is also best for society as a whole. In some cases I believe it is not. As far as minimum wage, I believe it is.
Minimum wage has artificially driven prices as whole up and has brought many to be able to afford things they probably shouldn’t be able to afford. In many senses the “minimum wage” is partially responsible for our current meltdown as we are paying more for labor than what it’s worth just as we were paying more for housing than what it’s worth.
I would think any company would look at options and decide what would be best for the company. However if the employees can not legally say “I’ll work for 5$ and hour if you provide day care for me” then many such options are off the table. In short companies are bound pretty tightly these days as to what they can offer and employees are bound pretty tightly as far as what they can accept. In a more free market you’d probably see a much greater variety of “Deals” going on with labor and employers, with the end result of us being more competitive.
I don’t think it was an arbitrary decision, the woman was struggling for the last several years, after the increase in minimum wage, which the graph illustrates.
Question for those involved in manufacturing. The article claims that it is a $6 million a year business with 250 employees.
That’s a revenue stream of $24,000 per employee. I don’t know about their business, but we generally try to get 3 times a person’s wages in revenue to cover salary, benefits, overhead, and margin. So, if they have a similar situation, they are paying their 250 employees an average of about $8,000 a year?
Well let’s also remember why we have minimum wage laws - because historically companies have illegally manipulated the labor market to enforce artificially low wages.
There is also research to suggest that minimum wage laws were established to keep minorities out of the workforce by keeping wages higher than many would be willing to pay for minority employees.
But let’s assume your argument is true. In that case it would require the cooperation of all companies to keep wages down. For if a company wanted to attract the best workers, they would simply offer wages that were higher than the artificially low wages (could still be below market wages) and they would be able to have their pick of the brightest in the workplace. This would logically give them a competitive advantage which could offset the higher wage expense.
Also, to say that minimum wage does not cause unemployment is to say that the law of supply and demand (increase in cost will lower demand) does not apply to the labor market.
Retailers tend to employ a lot of minimum wage workers. In the current economic downturn, they’re having a tough time and have been doing everything possible to reduce costs. In 2007 the federal minimum wage increased 13%, in 2008 it increased another 12%, and in July of this year it will increase another 11%. The total increase from July 2007 until July 2009 will be more than 40%. One has to wonder, how many retail workers have lost, or will be losing their jobs as a result of the 40% increase to one of the largest expense items those retailers can control? You’re right…I’ll bet their are an awful lot of unemployed people out there that would like to be working for the same wage that they received 2 years ago, rather than be unemployed at the current wage.
Total increase from September 1997 to July 2007: 0.0%.
why then, following this line of thought, not make the minimum wage $2/hr so we can compete better against 3rd world countries? After all having a job for $2.00 an hour is better than being unemployed, right?
No need to type that in pink. I agree 100%…better yet, no need for any minimum wage laws. That’s what the free market is for.
I would love to hear your tune if your boss decided to lower your salary to $200/month because somebody else somewhere around the world could do your job for exactly that amount.
Yes but my point is that the graph “illustrates” a greater “visual” increase than there actually is by starting at 4$ rather than zero. This is a common approach when people are trying to show you how “Bad” or good something is.
You make the difference between 1 and 1.00001 look REALLY huge with the right “Graphical” representation.
Again not arguing the point but it always makes me question the bias of the source when I see graphs like that.
ST. LOUIS POST-DISPATCH – *A young St. Louis mother who hand-painted barrettes to tame her daughter’s unruly locks, turned the hair accessories into a $6 million dollar business (*WeeOnes.com) that sold 2 million hairbows in 2007 and employed 250 workers in Missouri. It’s a success story that could only happen in America, right?