Minimum Wage: Why $15/hour Actually Benefits No One

Minimum wage, the legally mandated price floor on hourly wages, below which non-exempt workers may not be offered or accept a job, has been at the forefront of debate for some time now as many low income workers argue that a raise to $15/hour is a must. The foundation of this argument is that minimum wage should be a living wage, which raises in correlation with inflation rate. In my opinion, this is not, and should not be the case.

There are many arguments against an increase of the minimum wage, but two will be discussed here: the effects on the economics of a city, and the actual net benefit of an increase.

Starting with the latter. To the naked eye, and increase in minimum wage seems to be a logical method of increasing the income for low income workers, but this is not actually the case. An increase in the minimum wage reflects an increase in the amount earned per hour, but with costs to a company increasing, it is very likely that hours will be cut for employees. Couple this reduction in hours with possible investment in technologies that will replace workers and you may actually see a decrease in the overall amount which a single worker will bring home per week. An organization’s end goal is to turn a profit, so an increase in costs must be coupled with a decrease in other costs to keep margins consistent.

Turning now to the economic impact, Harvard Law alumni and current Editor in Chief at the Daily Wire, Ben Shapiro noted an increase in minimum wage is the first step if you want to “hollow out the economy of a major metropolitan area in the United States.” Breaking Mr. Shapiro’s argument into steps is as follows. When you increase the minimum wage, rent in the surrounding areas then goes up in correlation. When the rent goes up, you must now create affordable housing for lowing income families to live. Taxes must then be raised in order to pay for the families living in the affordable housing. This increase in taxes then leads to people moving out of the city to save on costs. With people moving out of the city, taxes must be increase on the remaining residence in order to account for the population loss. These higher taxes then decrease the disposable income of population, thus decreasing the money being spent within the local economy. This lower spending then causes local businesses to cut back on staff and/or shut down operations. These cutbacks then create greater unemployment, which will continue to rise until the entire economy of the city has been hollowed out.

As one can tell, the minimum wage issue is not one that can be argued before examining all of the possible ramifications if an increase was to be imposed. Although most arguments against an increase in the minimum wage center around the themes that low skill equals low pay and that minimum wage was never intended to be a living wage, analyst driven arguments exist as well. In fact, if those in support of a minimum wage increase were really concerned with the financial well-being of minimum wage workers, it would do them good to understand the long-term effects an increase will have. Education and acquisition of knowledge are the keys to helping people become financially successful, as it will help them progress in their careers, not an increase in the minimum wage. As with most things, the simplest solution is usually not the best solution after all.

 

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Disclaimer: The opinions and ideologies expressed in this article are of my own. Understandably, others may have contracting views for which I ask express in the comments section. Understanding all views is important to building a better future.