Minimum Wage Promotes Child Labor and The United States is Responsible

It occurred to me today while playing baseball, as I picked up the baseball I noticed it said, “Made in China”. “Huh”, I thought to myself, “How is it profitable for China to make something so simple and ship it 7,000 miles on a boat to the United States for sale in our stores.” Additionally, “How come we can’t produce softballs here for cheaper?” was another thought that crossed my mind.

Then it came to me, making softballs in the United States is essentially illegal.

I started thinking about all the products in a Walmart then that are also “Made in China” and it occurred to me that most of the things that came to mind where kids games or cheap things made of plastic.

Again I thought, “How can China make something so simple, ship it 7000 miles across the sea, and do all this cheaper than these items could be produced in the United States?”

Again, it came to me, making these things as well is illegal in the United States.

You might be thinking, “Hey wait a minute! It can’t possibly be illegal to make these things in the United States, we are the freest country in the world!”

It’s okay I thought that once too.

Many times legislation that gets passed that “everyone” wants and has “good intentions” has “bad” and “unexpected” repercussions.

Well, they aren’t unexpected if you understand free market economics.

So let’s examine how it’s illegal to make these things in the United States and how because of this, it promotes child labor.

Minimum Wage, the Culprit…again

At the time of this writing, minimum wage in the United States is $7.25 Also around the time of this writing the average salary in China is about $14,000 a year in US currency. The “minimum” wage someone can be paid who works full-time in the United States is $15,080.

Are you with me? The minimum someone in the United States can be paid is $15,080, the average someone in China is paid is $14,000 for a full time employee, working 40 hours a week.

Because there is no “minimum wage” law in China workers in the rural areas are paid about $200 a month working 6-7 days a week. That equates to $2,400 a year.

What skill level and labor category do you think producing children games, things made of plastic, softballs, and many other things fall in any country?

If you said toward the bottom, you’re correct.

That means most of the things in Walmart are made by workers making about $2,400 a year in US Dollars. Pretending that they only work 40 hours a week (they work way more); this equates to about $1.15 an hour.

Put in to Real Terms

Let’s say a softball on average in the United States shipped from China costs $4. Let’s say each softball takes about $2 of labor (I have no idea) and let’s say there’s $1 to ship, for a total raw material cost of $3, resulting in a $1 profit per softball. (My guess is the softball costs more than this but just to illustrate the point I’m using these numbers.)

Now, minimum wage is $7.25 in the US and the people who make softballs and other low skill things are making $1.15 an hour in China. People in the US make over 6x more in the low end labor market as compared to the low end labor market of China.

What does that do to the price of a softball?

Well if the labor cost of a softball was $2, the labor cost in the United States would be at least $12. There would be less shipping because it’s local, so let’s just say if we made softballs in the United States, there would be no shipping.

We now have $12 of raw costs for a softball produced in the United States verse $3 raw costs for a softball produce in China or 4x more.

The markup on the softball from China is 1/3^rd, the same markup on a softball produced in the US would be $4, resulting in a softball costing $16 as compared to $4 when made in China.

Thanks to minimum wage laws in the United States, we cannot produce a competitive softball in the United States to sell to our own people because we wouldn’t be able to pay workers as little as required to compete with places like China who have no labor laws, which yes, does result in children running most of these factories.

Conclusion

This is just one example of many, of how the minimum wage law sends jobs over seas and virtually makes it impossible to run these types of businesses here on our own soil.

You might be thinking, well that’s good, we don’t want jobs in the United States that can only pay $1.15 an hour.

And to that I still say, $1.15 is better than $0 an hour and unemployed; when unemployment goes away, then you can talk about not working for $1.15 an hour. But the fact is, there are plenty of people in the United States who would take that job right now because something is better than nothing or they don’t need to make minimum wage.

What has the United States become that we can’t even legally produce things such as softballs here because of our own legislation?

Everything we buy that requires low end labor and even some higher end things is now “Made in China” or some other country.

We are no longer competitive in these industries, which is entirely fine, IF and only IF, we have maximum employment in the United States. Until we achieve maximum employment in the United States; minimum wage should be at least temporarily suspended.

Who knows, we might find a way to produce a better softball that sells for more resulting in wage increases for people in that field. Or we could make more softballs with fewer workers resulting in higher pay. That’s how America works, through ingenuity, but we aren’t even given that chance anymore.

I’m not saying people don’t make softballs in the United States or low end labor items; I’m saying, it’s that much harder to be competitive against countries like China, and we will continue to lose jobs and entire industries to such countries until we check our “ego” and get ourselves back to work.

We are no better than anyone else in the world. We don’t deserve to make more, just because we are American; we deserve to make more because we work harder and smarter. It’s time for someone to knock us off our horse, and China is the country willing to do it.

Until then, the United States minimum wage policy promotes child labor in other countries as we consume things such as softballs. If we produced our own stuff at home and didn’t have such a high demand for low end goods, China would have nowhere to ship these products to and no reason to make them.

Resources

http://www.averagesalarysurvey.com/article/average-salary-in-china/15201531.aspx