Will a $15 Minimum Wage Help the Poor?

The debate about raising Minnesota's minimum wage to $15 per hour has been in the news a lot lately. On the surface, it sounds like a good idea. Why wouldn't we want people in low skill jobs to make more money?  However, what's not often mentioned or understood is that raising the minimum wage will ultimately hurt the people it's meant to benefit.  Substantially increasing a business's labor cost will result in fewer jobs (layoffs and less hiring) and increases in the prices customers must pay for their goods and services.  In some instances, mandating higher wages could force marginal businesses to close.   

Minimum_Wage_Small_2016021115now.jpgRecent coordinated nationwide 'Fight for $15’ protests held at the end of November have spurred on propaganda and news stories.  It is curious that often people who don't even work at the businesses under protest seem to be leading the protests.  

The protests appear to be union backed and/or driven.  Are the unions involved purely out of altruism or do they have another motive?  Would the unions benefit from a higher minimum wage?  Some radio talk hosts suggest that many union contracts have a pay scale that is linked to minimum wage.  Unions are also trying to organize the various service industry workers.  If those workers unionize, it means more dues for the parent union(s).  Writing about this is not an attempt to disparage unions.  Unions have been and can be good and bring much needed changes to the benefit of workers.  That said, in this case it appears unions may have ulterior motives in the 'Fight for $15.'

It is ironic that fast food businesses are the target of many of these protests.  Big fast food corporations are on the cusp of utilizing automation to make burgers, as well as offering automated order entry kiosks.  And don’t be surprised when the fast food companies simply create a phone/device ordering app. That allows the customer to order and pay by app, so no kiosk is even required. 

Many small, local, labor intensive businesses will be forced to raise their cost of goods and/or services.  That may make them cost prohibitive to customers.  Or if the businesses were marginally profitable, they will go out business entirely with an elevated labor cost.  Either way, it will likely lead to fewer choices for customers as well as higher prices.

Businesses/Corporations are always searching for ways to do things better, faster, and cheaper.  Arbitrarily increasing the minimum wage incentivizes companies to reassess their cost structure and seek better/faster/cheaper.  That will likely expedite the transition to automation.   

If the protestors are minimum wage fast-food employees, their time would be better spent by increasing their skillsets and education, instead of agitating and protesting. Their jobs are on the precipice of becoming obsolete.

To read further on this subject, click on one or more of the following links:

Forbes, "Thanks to Fight for $15 Minimum Wage, ..."

Center of the American Experiment, "Minimum Wage Forum ..." 

Money. "Minimum Wage since 1938"

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