Would society benefit from raising the minimum wage to fifteen dollars? The minimum wage has increased over the years and everyone has their opinions. Those who are in favor of increasing the minimum wage to fifteen dollars believe that more money will decrease poverty and unemployment rate. A repetitive battle between both political parties and the people have all led to that big question. The advocates claim the increase of the minimum wage were to be raised, then many economic and social problems would be alleviated.
This solution breaks all of the principles of economics and many extensive researches that back up the outrageous idea would in all end up hurting the people it is actually meant to help. Those who oppose the increase in the minimum wage, believe that it should not be increased and should stay the same because it will cause harm to the people that it is supposed to help, lead business to lessen their employment with the increase of the wage and also inflation in our economic system.
The biggest talked about minimum wage raise was in 1914 when Tom Ford announced that he would pay its male factory workers a minimum wage of five dollars per eight-hour day from the previous rate of two dollars and thirty four cents per nine hours. He was able to do this because at the time the economy was more liberal in a sense that the government did not interfere that much in the market.
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Ford understood that if he wanted a competitive product he needed competitive workers to push out these products. Not only did he raise the minimum wage but, Ford also cut the work day to five days and 2 rest days. Ford mentioned in one interview that he did that the reason behind his decision was because he knew that everyone needed more than one day to rest and spend time with their family.
The marginalized group that is intended to help will in fact cause more harm to them because businesses can not afford to keep all of their employees for double the price of each employee. Business will rule out employees who are not worth the fifteen dollars that they are paying for, which will cause a rise in unemployment. Businesses will indeed funnel out employees that are not needed or at risk of causing the business more expenses.
This observation was stated by David Nuemark and William Wascher in their book Minimum Wages, which repeats that low skilled employees will indeed be fired or not hired and it tends to hurt the overall income of the workers even with the increase in minimum wage (Neumark & Wascher, pg. 191, 2018). The authors not only show people who are new to the workforce will likely not get hired, but also the hours of the workers will get cut to compensate for their wage.
This is even worse for small businesses who are predominantly run by a small group of employees because the business itself can not afford to pay the employees more. Just one look at their business ledger and expense books, one can clearly see how devastating it will be to increase the employees pay. Think of the small family owned convenience stores that are scattered throughout our city, some of them are already struggling to make ends meet every month. How can they be able to afford to pay their employees double their wage? Now think of it on a larger scale like Walmart or Target.
These companies fear the wage because it will cost them thousands of dollars to maintain employees. That is why we see less cash registers open and more of the self checkout. To them it is like “why pay for ten cashiers when we can pay for 2 and have them watch over 15 self checkout lines”. It ensures companies their money’s worth but at the cost of losing many employees, which actually need the jobs. Who is being helped in this situation? It seems like a lose-win situation, in favor of businesses.
Employees have to accept the fact that if you want to earn more money, you have to work your way up or find a better job that is more suited for you that pays more. The majority of employees that complain about the minimum wage are people in entry level positions. Meaning the jobs that they are in are not meant to support a family, but for a highschooler or a college student. These jobs have flexible hours and require minimal effort. Those types of jobs do not have a high payout because not much thought is needed to work in those positions. Companies pay equivalent to how much thought processes are needed for the job. It will not make sense that a Mcdonald’s employee is making fifteen dollars an hour, while a paramedic is making nineteen dollars an hour.
Thinking of it seems absurd on how people actually believe that is a norm that should be standardized throughout the whole country. They are two completely different jobs, one requires a lot of training, while for the latter is just flipping burgers. How is that a fair trade-off to have in the system? It levels the field where both are getting paid the same, but obviously the paramedic job takes more skill to perform. That person will think to themselves, why am I getting paid the same as the person flipping burgers when I am putting in more work. Naturally workers will take the path with least resistance, rather than a job that requires more but is not rewarded.
As previously stated companies and small business owners also suffer greatly because of the increase in the payroll that will no doubt cost them thousands of dollars. They will be forced to cut employees hours for the sake of keeping the business running. Hansi Lo Wang, a small business owner in Soho, intensely said in Weekend Edition Sunday podcast, that he would be forced to cut employees hours just to cover the basic bills such as the light, gas, and insurance (Wang, 2016).
Not only is he forced to cut the hours, but he himself has to work more hours to cut down payroll and at least make a turn in profit. This does not just go for him, many have spoken out about the same issues they will be faced in their own businesses. It will not be an ideal situation for them and many may have to sell their business to bigger businesses that are more suited to take in this drastic change in wage.
Businesses should be allowed to be run by the owners without the intervention of the government because in actuality if the businesses are doing good, owners tend to raise benefits for their employees. For example, Donald J Trump tax reform cut, corporate tax rate went from thirty percent to twenty-one percent. This spark tremendously through our economic system and well known companies responded in a good way (“President Donald J. Trump”, 2018). Apple pledged billions of dollars in benefit for their workers, Amazon raised their own minimum wage to fifteen dollars and so did Costco.
They were able to do so voluntarily because their companies were doing good. The abundance in profit was more than enough to share their wealth with the workers. Companies understand the relationship they need to have with the workers. In order for them to have competitive products, they need to also have competitive workers. Employees who will also want to see the company strive not only for their own benefits, but to secure a long lasting job. Not only does this favor the workers, but also in a bigger way the consumers too.
The increase of profit can affect the price on the products by making it even more affordable for consumers to buy. However, this only works voluntarily, done by companies that know they can afford this change and still make a profit. That is not the case for companies that are forced to run up the wage. The inflation that it may cause in the economic system can decrease the value of the dollar and increase the price for products. As stated in John Phelan article, Raising the Minimum Wage Is Bad Public Policy, three-quarters of economists oppose raising the wage for that same reason, the increase on the prices of the products (Phelan, 2019).
A common law in economics, where to turn profit you have to either cut expenses that are not needed or raise the initial price of products that are suited to support the companies. Which will just put us again in square one where people complain about not being able to afford things because of their low wages. This has been seen throughout history, even in our lives. The prices of things we use to get in our younger days such as cans of soda, chips, and candy has throughout the year. Not because the product has gotten more expensive to make but the man power behind it has become more expensive to maintain.
The increase in minimum wage increases the price point of products in the whole market. That is why cans of soda back then used to cost a quarter but now have increased to a dollar or even a dollar-twenty five cents in some stores. That is inflation, the power of the dollar decreases with how much money is being forced into the increase in minimum wage.
The facts are clearly given to us that the increase in minimum wage is not going to help the people that are marginalized. We should look for the real problem which is money management. Society needs to understand that their problems are not going to go away with just more money into their pocket. A good structure and knowledge on how to spend and invest money goes a long way in our economic system. If a better opportunity comes your way to make more money you should take it. Our economic system would strive more with the absence of the government because we the people can control the flow of demands for product and human labor. The ideal system we should strive to achieve is a free market system. A system where it benefits the consumers, workers, and companies all together by maintaining our money in our system.
