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Originally Posted by manny_santos
Part of the problem is that minimum wage in Ontario and other provinces is too high. Every time the minimum wage goes up, it hurts Ontario's economy. People like myself who make minimum wage make only a small amount of extra money, but get hours cut back so we're making as much money as before or even less. I am definitely making less money now than I was at this time a year ago, when minimum wage was $8.75.
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The reason why minimum wage hikes hurt the economy is that employers who rely on minimum wage workers cut hours back in an attempt to make the same amount of profit as before. The cost of that practice is borne by workers (in terms of lowered living standards) and by customers (longer waits because there might now be only one cashier to serve ten customers where before there were two).
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In the meantime the cost of doing business has gotten so high here that businesses like Stirling Truck are pulling out of the London area and are moving to Mexico, where the cost of labour is much less. And no, the lower minimum wage does not mean the people there who are employed are living any less comfortably than us. The cost of living there, compared to here, is much, much less. Here we are getting ripped off for a bottle of Coca-Cola, as an example - here it now is $2.25 from vending machines but down there it is 10 pesos, or 86 cents Canadian. Another example, the Internet cafes there charge 69 cents Canadian per hour, while Head 2 Head Games in London (one of the few Internet cafes in this city) charges over $5/hour. Not surprisingly, last time I was in there the place was deserted.
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The problem with Sterling Trucks is that pulling up stakes and going to Mexico may result in short-term profit gains, but if the people who used to make their trucks can no longer buy as much as they used to, eventually a situation will be created where fewer trucks are sold because of less economic activity in the place where the trucks used to be built. Business leaders can be incredibly short-sighted and mean-spirited.
GM, for instance, could have afforded to continue paying its workers $75.00 per hour (benefits factored in), but it wanted to get out from under the pension and health obligations it willingly agreed to, just so it could make bigger profits. So, what did they do? They trashed the company to make sure that it would go into bankruptcy. Years of bad engineering, inadequate funding of R&D and slipshod marketing research were also major contributory factors to GM's demise.
Never let anyone tell you Big Three workers were making too much money and were therefore uncompetitive. European and Japanese auto plant workers actually make as much, and sometimes more than their North American counterparts. They have to, in order to be able to pay the income taxes that fund their extensive cradle-to-grave social welfare entitlements.
On the other hand, I will concede that prices for a lot of things in Canada are seriously out of whack relative to what people can afford to pay, and are not justified by the actual value of the goods or services sold. As for $2.25 for a bottle of pop, there are options - buy it at a variety store or don't drink it.
If the vending machine operator sees he can't sell at $2.25, he'll cut the price. Remember that when you buy anything from a vending machine, you are really paying for the convenience, not the product. Wholesalers of vending machine goods know this and price their products accordingly, which means their profits are built into the inflated price you pay.
As for Head2Head Games, they too are operating on the convenience factor and charging accordingly. But they're also charging an inflated price to try to get you, the customer, to pay for the dead times when they're not making any money.
Actually, Mexicans do not live as comfortably as we do. Just try getting very sick in a small town deep in the interior of Mexico and see what happens. If you're lucky, they'll medivac you by chopper to Cancun. If you're poor like most Mexicans, you'll suffer. Or die.
Prices in Mexico are cheaper because there are vastly fewer health and safety regulations for companies to contend with. There's no minimum wage law there either.
Plus there are few, if any protections for employees and consumers. Workers' compensation plans are expensive to run and happen to be non-existent in Mexico. Pollution controls are similarly lax. A bottle of Coke that sells for $1.50 here in Canada would go for the same price in Mexico if the extensive consumer, labour and environmental regulations that exist in Canada existed there too.
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Our economy would be in much better shape if for-profit companies could accept lower profit margins to stimulate spending, and if the government freezes the minimum wage for the next few years to keep Ontario competitive on the global market. The minimum wage level does not make much difference for a minimum wage earner such as myself, but it makes a huge difference for companies.
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Uh, hate to break it to you, but businesses will NEVER accept lower profit margins to stimulate spending. They only time they will ever do so is when their survival is at stake.
Freezing the minimum wage will do nothing to improve things. The vast majority of minimum-wage employers are businesses that either make razor-thin profits (and therefore are marginal players) or simply greedy entities that know they can get people to do the work for so little money.
I leave it up to you to decide which category companies like Wal-Mart fall into.
Indeed, many such businesses are so marginal that if they had to pay a living wage and make a profit they couldn't survive. In other words, their profits are made on the backs of their workers, who deserve a fair share of the fruits of the company's revenue-generating activities.
Sure, you could eliminate minimum wages altogether, but employers would royally abuse such a system. Taxes would skyrocket as governments attempt to ensure people have an income they could live on and so the economy as a whole wouldn't collapse. The corporate sector is already very extensively subsidized, why add insult to injury?
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At the same time executives need to take big pay cuts. They are also destroying the economy.
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Agreed. However, the problem with the Western economy, as I see it, is that too many people are trying to make maximum profits while denying the other guy any profit at all. To see what I mean, consider the cost of a hybrid car. No doubt the batteries in these cars are expensive, as are the research and development efforts needed to bring the car to market in the first place. Yet hybrid cars are priced not according to the battery and R&D costs plus a fair profit, but to ensure that what you save at the gas pumps goes into the pockets of the manufacturers and not the pockets of consumers.
In other words, the manufacturer gets all the profit out of the transaction, but you get nothing other than the illusion of saving money and doing something good for the environment.