Thursday, April 14, 2016

The Capitalist Response to $15/Hour

While many of us roll our eyes at the thought of someone putting together 20-cents worth of hamburger ingredients making $15 an hour, there will be ways for the financially savvy to make more money themselves from the ultra-minimum wages being adopted by a growing number of states.  The key is to know where to invest.

As lottery winners who go broke prove, just because you give people more money, it doesn't mean they are automatically going to spend it wisely.  Those "feeling the Bern" would have you believe that all $15 earned every hour are going to pay for things like baby formula and organic, non-GMO locally-sourced, sustainable groceries packaged in Earth-friendly containers at farmers markets.  But human nature tells us that those getting a sudden boost in pay won't change their spending habits--they will just spend more on what they were buying already.

So where will that money go?  Here are some likely sources:
Tobacco companies.  The Centers for Disease Control finds the smoking rate among low-income Americans is 26.3%--the highest among any socio-economic group in the country.  That means those "struggling to make ends meet" still find a way to carve out enough in their budget to purchase one of the most heavily-taxed items sold in the US.  With less perceived financial strain, those smokers may buy a few extra cartons with the higher minimum wage.

Marijuana Dispenseries.  I'll admit that investing in this area is dicey--since the Federal Government still considers marijuana to be illegal and banks won't take any money from those businesses.  But where do you think most of the legalized pot dealers set up shop when the drug was legalized in Colorado?  In low-income and minority neighborhoods, of course.  In drug sales as in real estate, it's all about location, location, location.  And with more money for those already regular (non-addicted) customers to spend on getting high, those pot places are going to pop up in more spots than Starbucks in the upper and middle class white neighborhoods.

Brewers and Distillers.  Why do you think liquor stores and bars cash payroll checks?  Because they know a good percentage of that money is never leaving the building.  An added bonus is that those who could only "afford" the cheap stuff will "step up" to more premium brands--with much higher profit margins (do you really think it cost more to brew Budweiser than it does Busch Light?).  Boone's Farms may have to start marketing itself as a "Hipster Wine" to keep its market share up.

Tattoo Parlors.  Again, not an investment you'll be able to make with your broker--but the next time you are at the burger joint or the discount rate motel or at a bar, check out how much ink there is on the staff.

Big Banks.  This is not based upon a belief that these institutions will be flush with cash as those who have been "struggling to get by" race to deposit their new-found earnings in savings accounts for the future.  Instead, this is based on the explosion that will be seen in car loans and credit card debt.  The thing about increasing the minimum wage is that you don't get all of that "extra money" to buy all of the stuff listed above right away.  It comes a little bit at a time every two weeks.  But the first math equation that those getting such a raise usually figure out is how much they can now "afford" in payments to get what they want as soon as they want.

Yes, those of us already making a "living wage" can expect to pay $7 for a Big Mac someday--but we may just be able to cover that with the wise investments we made based on the foolish financial decisions of others.

No comments:

Post a Comment