$15 Minimum Mistake


A $15.00 minimum wage, while sounding like the obvious answer to raising the buying power of low wage earners, is really a false, misunderstood political move that embezzles their future prosperity.

Many of the cities that have raised wages to the $15.00 minimum already, initially reported that employees are happier with higher wages per hour, but there are indicators that tell a different story. Restaurant businesses that often are the employers of a number of lower wage earners, are a useful example.  To adjust to the new hourly wage, they have eliminated some less important positions, or have shared some positions between several employees to reduce costs. Some workers may get moved to part-time status.  Most of these restaurants have also raised food prices.  Restaurant owners, like any private business, are not going to operate at a loss for very long. The pandemic has shifted all present and future responses to an unknown status, but we see many small, non-chain restaurants closing permanently.  We will have to see if more closures take place or whether the recovery phase allows for a different economic formula.  But an artificial wage increase of 20% to 50% is not helpful for any business recovery at any time.

Aside from pandemic struggles, general rules of economics tell us that a 100% increase in the federal wages from $7.25 to $15.00 per hour has to impact operating costs.  For example, the merchant that supplies goods to the restaurant like vegetables, linen, tables, packaging, etc., will have the same sudden wage increase to deal with and will pass some or all of these costs on to their restaurant clients. More importantly, the restaurant wage earner who now earns $15.00 per hour will face these same cost increases next time they shop for food at their local market or shop for merchandise online or at their local department or warehouse store because those employees now receive the new wage.  In short time, the $15 per hour wage increase will less and less benefit the low wage earner it was designed to help because other stores, merchants and restaurants have raised their prices to compensate for the wage increase that they all have encountered.  Higher wages will also mean higher taxes and less opportunity for younger, first-time employees.  The ultimate effect is an artificial wage increase that sounds so helpful at first, but becomes a thief of real wages later on as the rest of the market raises prices to adjust to this additional market-wide business cost.  Politicians who push these artificial wage increases for political gain are hurting the very electorate that they aspire to help.  These artificial increases create inflation.  Smarter representatives will vote against these artificial wage increases or approve only slight increases.

So, what is the answer?  Leave the artificial wage increases to the political thieves.  When your own working productivity raises the productivity of the company that you work for, they very likely will raise your pay to keep you happy and encourage more productivity.  If not, you will move to another company that understands how you increased productivity.  Real wage increases come readily from businesses that want to retain good employees in an economy that is growing and producing markets for their business products.  Being paid more for your labor gives you a relative economic advantage over others that is real and more lasting.  Companies that do not experience this boost in productivity will not likely increase wages nor the cost of their products and services.  Because the wage increase is not market wide, but limited to you – presto, you have real wage gains.  An artificial wage increase works against this conclusion.

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