Thursday, August 13, 2015

A $15 Per-Hour Minimum Wage Raises Questions

Here's what a friend recently had to say about proposals for the $15 per-hour minimum wage. It makes a lot of sense to us:

I'll start this post by saying I'm all for a living wage. I'm not an economist so I don't know what that number is. But for those who are big on the $15/hr movement you have to realize the Law of Cause and Effect, which includes the law of unintended consequences. Think of all of the industries (almost everything) that employs workers for less than $15. From cashiers to bank tellers, dental assistants to customer service reps, our society is structured off of keeping the hourly wage as low as possible (I didn't make the rules, just observing a historical fact). 

So now think of what will happen if we increase minimum wage nationally to $15. Businesses aren't just going to sit back and take that. Everything you consume will have a significant price increase so business owners can now pay this new wage, including rent, food, gas, services ... everything. This will clearly defeat the purpose of even raising the minimum wage as those workers could quickly become worse off than before the raise by the time they deal with inflation. 

When you raise the minimum wage to $15/hr, it's not just the stereotypical fast food worker, it's everyone who currently makes more than minimum wage but less than $15. Our economic infrastructure can't handle this.

And it's not just minimum wage workers who will be affected. It will be the middle class who will also be paying more for everything, who make just enough to not qualify for gov assistance (including some student aid and pell grants) but not enough to get ahead, who are already having to take out loans and refinance their house to put their kids through college or pay for an unexpected medical bill and who will also demand a salary increase to scale with minimum wage workers ("if that guy flipping burgers makes $15/hr than I deserve XX). And it will have an upward spiral effect driving inflation through the roof and our country will be all the worse for it.

Not to mention the people who will start to say, "I'm not working this hard to make $16/hr when I could go bag groceries and make $15/hr." We simply can't imagine the cumulative ripple effect this will have throughout society.

The other side of the story about businesses not sitting back and just taking the hit on having to pay their workers more will be things like this - automating the jobs (and outsourcing where they can), which will leave more people unemployed and making less than what they do now if they have to rely on gov assistance. Don't believe me? Study what happened to Detroit as unions kept demanding their workers be paid more. (P.S. this isn't a union bashing post, but take a look for yourself)

Again, I'm all for a living wage, but we have to be smart about it and can't just turn our economic system on its head overnight.

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