Tag: 15 dollar minimum wage

Raising the Minimum Wage Will Harm Workers and the Economy

By Othman Mekhloufi | United States

Left-wing and Keynesian economics have overwhelmingly called for an artificial raising of the minimum wage. This has been due to the belief that all workers must be paid a living wage regardless of their line of work or skill set. Essentially, this is a belief that it is unfair to not compensate workers with a living wage. However, to require employers to compensate their workers with higher wages will only play to the disadvantage of said workers through the inflation of prices, unemployment, as well as the cutting of work hours. Hence, resulting in a worse off economy for all individuals, and simply an unpragmatic economic policy.

The minimum wage is the legislated minimum amount of money an employee may be legally paid for their work. This minimum wage, whatever it may be, is not necessarily a living wage, but rather a wage paid for jobs which require a minimum amount of skills. For instance, if a worker were to create more than twenty dollars an hour for their employer, they would be compensated for twenty dollars an hour, or less. In essence, workers are paid according to how much they produce, and how much is possible to pay them. Such a method of compensation allows businesses to remain financially afloat by being able to make money at all, and, in turn, pay off expenses.

As a general rule, it is positive for all individuals for a business of any size to remain afloat. When businesses are present in the economy, it allows for a product and/or service to be provided to the consumer end of the market. In addition to this, jobs are created with the existence of the business, as well as its future expansion. 

However, when the minimum wage is artificially raised by the government, employers will be legally required to compensate some of their employees for possibly more than they initially produce.

Considering small businesses, this will result in one of two major negative economic repercussions. The first of which is work hours getting cut and employees getting laid off, resulting in the business most likely ceasing operations. The second impact is inflated prices, resulting in individuals, as well as the economy, being harmed. 

When small businesses must compensate their employees for more than they initially produce, compensation is rendered financially impossible. As a result, small businesses will be effectively forced to lay off employees, causing unemployment.

Having to lay off many employees, small businesses will be unable to continue their production, resulting in businesses being forced to cease operations. Considering the fact that small businesses are not as large-scaled as others such as McDonald’s, automation to replace workers would not be a viable option as it would be unaffordable.

Through causing small businesses across the board to cease operations, unemployment is bound to be brought upon the economy. In addition, the product and/or service that the business initially provided to the consumers would be brought off the market causing additional burden to customers who relied on said product and/or service.

For example, if a small business has workers that produce thirteen dollars for each hour of work, but compensates said employees seven dollars and twenty-five cents an hour, it would allow for the small business to rake in five dollars and seventy-five cents per work hour after paying employees. These five dollars and seventy-five cents would be used to pay other expenses, make a profit, as well as generally stay financially afloat. However, when the government is to raise the minimum wage to fifteen dollars an hour, the small business would be forced to pay employees two dollars more than they initially produce. In turn, the business would begin to lose two dollars for every work hour, as well as experience a total absence of income. In light of having no income, and losing two dollars an hour to compensate said employees, and to remain financially afloat would be impossible. Such would result in the small business having to lay off said workers.

In this case, automation would not be a viable option for said small business as it would be unaffordable. In the case where it would be affordable, said business would not be small, but rather one of larger scale.

Due to being unable to automate, and having a lack of labor, the small business would be unable to produce the product, and/or service which was initially produced. In result of such, the said small business would be forced to cease operations.

To avoid laying workers off and, in turn, ceasing operations, small businesses have the option to raise prices to remain financially afloat. However, this option is in itself still a negative economic repercussion for both the consumer, and the business. If businesses are to raise prices, many customers would be driven to competitors who offer a cheaper price, or would simply cease purchasing said product and/or service as a whole. In turn of such, businesses would begin to lose out on income, and the customers who remain would be financially burdened with higher prices.

Such economic repercussions are not limited to small businesses as the same has occurred with Starbucks in 2018. Starbucks had announced that it would be closing roughly three times as many stores in 2019 than it usually would in a year. The closures of these Starbucks locations will be focused in densely populated and urban areas on the west coast, as well as in the northeast where the minimum wage is particularly high. Starbucks CEO, Kevin Johnson, had stated that the affected stores are “in major metro areas where increases in wage and occupancy, and other requirements are things that were making those stores unprofitable.”

In the case of larger scaled businesses and corporations who would not go out of business due to an increase in the legislated minimum wage, negative economic repercussions would continue to take place.

When the minimum wage is artificially increased by the government, businesses that are able to stay financially afloat while paying their workers more will experience income loss nonetheless. Businesses, in all cases, will want to mediate income loss to the greatest possible extent for furthermore profit. To deter such income loss through spending less money, said businesses will cut work hours, lay workers off, as well as raise the prices for their services, and/or products.

Inflation of prices would drive customers to competitors, as well as cause the business to lose out on income as a whole. Because of this, price inflation is an unlikely method to combat a loss of income for larger scaled businesses as they can afford other means to do so. Most prominent of these other mechanisms to cut income loss is to cut work hours, as well as lay off employees.

This was seen in an estimation made by the Bank of Canada stating that over sixty-thousand jobs will be lost by the year 2019 due to minimum wage hikes; along with a study conducted by the University of Washington which had observed that after Seattle’s minimum wage hike from $9.47 to $11.50 an hour, there had been only a one percent decrease in low wages.

When workers are laid off to mediate income loss, they must yet again be replaced by an entity to continue doing the necessary work the business requires. In response to such, automation of labor comes into play. We witness this in today’s world as McDonald’s has announced that they will be replacing cashiers with automated kiosks in all 14,000 of its U.S. locations as of 2020In addition, McDonald’s had announced that it was prioritizing such automation in locations with prominently high minimum wages such as Seattle, and New York City.

After nineteen of the American states had announced a minimum wage increase to ten dollars an hour in January of 2017, a month later in February, the CEO of Wendy’s had announced financial shifts within the company. Wendy’s CEO had announced a four percent rise in wages, along with an eight percent loss in margin. In turn of this, although not confirmed, but evidently understood with the previously explained economic theory, Wendy’s had announced a plan to install automated kiosks sixteen percent of its locations; a cheaper alternative to conforming to the minimum wage hikes and paying workers more. 

With all economic theory, and evidentiary claims considered, it can be understood that artificial hikes of the minimum wage will indeed result in unemployment, cutting of work hours, shutting down of small businesses, as well as the inflation of prices; all resulting in a furthermore disadvantaged financial situation for workers, the individual, as well as the entirety of the economy itself. Therefore, inherently proving that a hike in the minimum wage would be detrimental, and counterproductive to the goal of left-wing, and Keynesian economics.


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Minimum Wage Raises Are Causing Price Hikes – Just As Expected

By Mason Mohon | @mohonofficial

For us it’s very simple. There’s no big pot of money out there to get the money out of.

That was the statement of Mike Wiggins, owner of Granny Schaffer’s restaurant in Joplin, Missouri. He is being forced to raise the prices of food items up to 20 cents for one reason: the minimum wage increase.

Continue reading “Minimum Wage Raises Are Causing Price Hikes – Just As Expected”

The Libertarian Case for a Minimum Wage Hike

Nate Galt | United States

The federal minimum wage has been a controversial issue ever since it was introduced by President Roosevelt in 1938. Proponents of raising it say that it will help job growth and reduce poverty. However, opponents believe that raising the federal minimum wage will lead to layoffs and closures of small businesses. In all, the current federal minimum wage of seven dollars and twenty-five cents per hour is not a wage that someone can afford basic necessities with. People who are paid the federal minimum wage should be able to afford things such as clothes, food, and a roof over their head.  Raising the minimum wage has been an issue adopted by “progressive” Democrats and the Green Party. 

Taxpayers are paying for the minimum wage, just indirectly. They subsidize programs such as Food Stamps while large corporations save money by not paying their workers a living wage. This is extreme inequality because that money should go to workers employed by these corporations, not into the pockets of billionaires who try to cut corners by paying their workers very low wages. 

Raising the minimum wage would help the economy. According to the Economic Policy Institute, a minimum wage increase to $10.10 an hour would make $22.1 billion flow into the economy and would create about 85,000 new jobs in three years. Further, economists from the Federal Reserve Bank of Chicago made a prediction that if the minimum wage were to rise by $1.75, household spending would increase by $48 billion in the next year.  While these are merely predictions and are imperfect, they show that household spending increases as the minimum wage is raised. This boosts the gross domestic product and spurs job growth. For example, in Snohomish County in Washington State, there were no local minimum wages higher than the state minimum of $9.47. The state then raised the minimum wage to eleven dollars per hour. The full weight of the $1.53 increase, or over 16%, was assumed by employers. Subsequently, sixteen thousand jobs were created in Snohomish County. 

Some people say that raising the minimum wage hurts small businesses. According to Think Progress, two-thirds of “low‐wage workers are not employed by small businesses, but rather by large corporations…” Also, the three largest employers of minimum wage workers are Walmart, Yum! Brands (Pizza Hut, Taco Bell, and KFC), and McDonald’s. A hike in the minimum wage will not make large corporations like Walmart shut their doors, and its workers will benefit from it. 

Another reason the minimum wage should be raised is that it is impossible to afford rent in every state if one is paid $7.25. The state with the lowest “living wage” is South Dakota at just over 14 dollars, which is nearly double the current federal minimum wage. The definition of “living wage” is the bare minimum salary one needs to be able to afford rent, basic clothing, and groceries without skipping meals or receiving aid from the federal government. People who work full-time and are paid the minimum wage cannot provide basic necessities for themselves and their family, let alone afford to pay rent. Right now, this is the case, and millions of Americans are in a dire financial situation because they live on around only fifteen thousand dollars per year if they work full time. These people receive benefits which are subsidized by taxpayers because their employers do not pay them an adequate wage. As a result, businesses are saving money while taxpayers have to pick up the burden. If people get a living wage, they do not need to rely on taxpayer-funded public assistance. Better pay would let the government cut a lot of taxpayers’ funding of the money that it currently spends on programs to help counter poverty.

Others say that if the current minimum wage were increased, the price of items would increase. However, researchers at Purdue University found that increasing the wages of fast food workers to $15 an hour would only result in a price increase of around 4 percent. 4 percent of the cost of a Big Mac is around 23 cents, which is not a significant amount of money. The workers will have their wages doubled and will be able to make ends meet. Despite the negligible increase in prices, workers would end up with more money in their pockets and would be affected positively by this positively.

Increasing the minimum wage to 15 dollars would benefit the economy. It helps boost the GDP and job growth, and it alleviates taxpayers’ burden of paying for welfare. $15 per hour will allow minimum wage workers to make ends meet and to afford housing, clothing, and food without having to rely on government programs such as food stamps. It would reduce the number of Americans living in poverty as well. All of the above benefits have no significant drawbacks, so the only logical thing to do is to support raising the minimum wage to $15 per hour to help workers, the economy, and your tax rate. Should businesses get so-called “corporate welfare” while taxpayers have to foot the bill? Even though raising the minimum wage seems like a leftist, Bernie Sanders-type policy, all libertarians should support it. Taxes, welfare, and other benefits would be cut, leaving more money in Americans’ pockets. 


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Want to Help the Poor? Abolish the Minimum Wage

By Indri Schaelicke | United States

When it comes to the minimum wage, few people truly understand the complexity of the mechanism. Many believe that raising it is a quick fix to poverty. However, minimum wage hikes only increase the cost of living, hurting the economy for both the rich and the poor.

In 2014, Seattle signed a law that would increase the minimum wage there each year. By 2021, the wage will reach $15 per hour. While many support this law, libertarians are scratching their heads. Wages are an input of production, meaning that when a business produces a good or provides a service, part of its success is due to the employees and their necessary wages. When the cost of an input of production increases, the final price of the good or service must also increase. If all wages in a city increase, then all prices of goods and services will increase. Things will be no more affordable than they were before the minimum wage hike.

Minimum wage increases also lead to significant job losses. As mentioned before, when wages increase, the final price of a good or service must also. In order to combat having to charge high prices for their products, businesses can fire employees and move to automated systems that make use of the latest technology and do not require much human input. McDonald’s Restaurants recently started using automated kiosks in some stores to cut down on the amount of staff. This investment insulates McDonald’s from the fluctuations of the labor market and from the effects of minimum wage increases.

Kiosks like these have appeared in McDonald’s across the US as the fast food chain seeks to insulate itself from labor market fluctuations and increases in the minimum wage. Image Source

The minimum wage hurts those whose skills are worth less than a mandated minimum. As they are not worth, say, $15 per hour, employers cannot hire them at all. Someone whose typing skills only earn them $5 per hour is unable to find work at all. But, if the minimum wage ends, he or she will be able to find an employer willing to hire them. While $5 per hour is nowhere near the wage required to live a comfortable life, it is a stepping stone to higher paying jobs in the future. The person given in the previous example can work at improving their typing skills until they find employers willing to pay incrementally more. In this way, people are able to climb the socio-economic hierarchy.

Beyond just the minimum wage’s harm to the economy, it is also immoral, because it limits what terms two consenting adults can voluntarily negotiate a contract for. The state should not have any say in how a person values their labor. These terms are between employer and employee.

Abolishing the minimum wage will open up job possibilities for those that need them most. It is one step closer to a world where the state does not control every aspect of life. Individual sovereignty begins with being able to decide one’s worth.


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The $15 Minimum Wage is a Self-Defeating Goal

by Andrew Lepore | United States

In the last couple of years, those with little to no understanding of business and economics have been rallying in support to double the federal minimum wage. Organizations like Fight For 15 and raise up have been organizing to demand a coercively enforced and artificially set $15 an hour minimum wage.

As well-intentioned as these people might be, their ideas are misled. Their goal is to help the low skilled workers and immigrants, who they believe are exploited, to achieve a “living wage”. Yet those demographics, along with business owners, will be among the most hurt by such a policy. As evidence shows, and anybody with knowledge of the law of Utility Maximization could predict: an artificial doubling in the price of low skilled labor will make the investment of hiring unprofitable for most employers. This would lead to the incentive for businesses to replace labor with automation.

Wages simply represent how much an individual’s labor is worth, which is negotiated and agreed upon by the employer and employee. Any employer will hire any individual if they value the labor the potential worker will supply more than the amount of money the worker is demanding for a wage. If the government sets a minimum wage at a price higher than employer values the labor, it becomes incentivized for the employer to simply invest in automation to save money.

For example, imagine I own a business employing 40 low skilled workers at the current federal minimum wage of $7.25 an hour. My expenditures and budget were precisely calculated to give me a small profit margin and keep my business afloat. Now imagine the federal minimum wage is jacked up to $15 an hour. With the state requiring a $15 an hour wage the only possible ways for me to balance my budget and keep my doors open are to either doubling my prices for everything, or lay off workers.

Due to the fact that I would receive immensely less business If I doubled prices, that itself could put me out of business. The last viable option would be to lay off workers, as I simply cannot afford the government’s artificially prices labor cost. The solution now for the business owner is to invest in automation replacing as many low skilled positions as possible; as the cost to employ workers at the minimum wage price significantly outweighs the cost to invest in automation.

Scenarios like this don’t just exist in theory or in my imagination. Many times in the past wage hikes have been followed by mass increases in job automation. Taking data from U.S population in 1980-2015, a meager 10% increase in the minimum wage results in a .33% increase in low skilled labor jobs replaced by automation. In manufacturing its as high as a .78% increase . The demographics most affected by these wage increases are immigrants, females, and African Americans.

Just so my stance is clear, i’m in favor of the full abolition of all wage standards. I believe that the value to labor is something which in all cases should be negotiated and agreed upon by the employer and the employee. Moral standards aside, the minimum wage only serves to hurt workers it is designed to help.


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