I am not an economist, but I still like to dream big in money once in a while. I recently learned a very safe way to make a billion dollars, let’s say over 10 years. I won’t even try to convince you to send me a subscription fee of $100 for the secret formula. You don’t need divine help from above either, so void that donation check for $10,000 you just wrote to my mega-church. If you want good karma, make it payable to the recent storm victims.
Here it is, all for free. You pick a economically poor location in America where unemployment is high and land cost is low. You build a huge store there selling groceries, clothes, children’s toys, furniture, you name it. There are 3 major factors that are key to this money-making formula: (1) economy of scale — that’s fancy language for big so that you can make a lot of stuff cheap and sell it at a small profit margin, (2) the building cost or rent has to be lower than that of surrounding areas, and finally (3) the work force there is willing to work at the minimum wage.
The federal minimum wage that was set in 2009, and is still in effect today, is $7.25 an hour. Some states and cities have higher minimums. So you as the ambitious entrepreneur have to do some research. San Francisco may be a “bad” choice if all you care is how little you want to pay your workers. The city’s minimum wage is $14.00.
Let’s say you did your homework thoroughly and found a perfect location in Detroit, Michigan. You can build a big store there because land or rent there is cheap, and the minimum wage is only $8.50. You may even pick up an old Sears store for practically nothing if you are lucky. Make sure you keep your costs down. If most items in your store are made in China or some other cheap labor country, you should be fine. Since a lot of Detroit residents are looking for work, any work, you will have no problem finding people to work at only $8.50 an hour. At this writing, Detroit’s unemployment rate is just a tad shy of 10%.
Like most investment pundits would say, and I’m giving you the same: I can’t guarantee that you’ll make a billion dollars in 10 years, but the prospect looks really good, doesn’t it?
This all sounds wonderful for the potential investor/employer. But is it really as great as the hollow interjection of “Hey, people are working again!”?
The cynical answer is an old cliché: it’s yes and no. Yes, it’s good that people are working. At least they have something to do during the day, especially for the young and single. It’s not that great if you have to feed a spouse and 2 kids. It’s simple math. $8.50 an hour translates into $1,530 a month if you work full-time. ($8.5 x 8 hrs. x 22.5 days.) Without going into details, I think you know it’s barely enough for a single person living at home with his or her parents. If you are a parent, you need extra help, such as food stamps and other government subsidies. The end result is that, whatever the employer isn’t paying the worker to live on, the government fills the need. If for whatever reason, you don’t qualify for the latter, tough. And who pays the government to do that? Taxpayers like you and me. (To be fair, most rich people pay some taxes too.)
The theory is a proven success. Who’s doing it, you may ask? The answer is seen everywhere: Walmart – and they have been doing it forever. They are the biggest employer in America in terms of employee number, in the tune of 1.4 million people in the US, and a total of 2.3 million world-wide. They pay the majority of their employees the minimum wage. It’s believed that about 20% of them receive food stamps and other kinds of public assistance, which they use to buy food and necessities at Walmart!
When you are the biggest tree, you catch the most winds, so the Chinese saying goes樹大招風. There must be thousands, if not tens of thousands of employers in this country who love the minimum wage that the law allows them to pay their lowest ranking workers. Since Walmart hires the most employees, I pick on them to give them my gas.
A personal disclosure is in order here. When I was young, I had worked at the then minimum pay of $2 an hour. I also relied on food stamps to feed myself for a few months. That’s why I sound a little biased for the low earning workers. If you feel 10% of what I feel about making less than $10 an hour, which honestly is not enough to live on in America, vote “yes” in the next increase for them and their children please.
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