The Left want to raise the minimum wage to $15 an hour – however the problems this increase creates far outweigh it’s positive effects per studies.
Raising the minimum wage sounds like a good idea…
I mean, who doesn’t want to make more money, right?
But it’s not that simple. Why? Because economics is common sense made complicated.
In the end, it’s the lower income workers who take it on the chin, which is counterintuitive, given that the minimum wage is supposed to help them.
And the body of literature continues to buttress this point, including a recently published piece by the Harvard Business Review.
Bottom line? Increasing the minimum wage increases unemployment.
Because when you raise the cost of labor, the employer may be forced to fire workers, cut their hours, reduce employee benefits or a combination of the last two. The high cost of labor prevents employers from hiring more workers; they are unable to afford to hire more staff.
You and I will pay more for products as a result of a higher minimum wage because the only recourse a business has, is to pass the higher cost of their production onto the consumers through higher prices.
The higher prices will likely cause you and me to buy less of the product.
The gains to a few workers are drastically outweighed by the negative effect to other workers and consumers.
Economics lesson over.
Companies like Chipotle are increasing their wages to attract workers and are now passing those increased labor costs onto consumers, who will now be paying more for that burrito bowl with queso and guac that they’ve come to love.
Researchers at the Harvard Business Review wrote the following about their study of workers in California who following the state’s minimum wage increase:
“For every $1 increase in the minimum wage, we found that the total number of workers scheduled to work each week increased by 27.7%, while the average number of hours each worker worked per week decreased [sic] by 20.8%,” the researchers wrote. “For an average store in California, these changes translated into four extra workers per week and five fewer hours per worker per week — which meant that the total wage compensation of an average minimum wage worker in a California store actually fell by 13.6%.”
“We found that for every $1 increase in minimum wage, the percentage of workers working more than 20 hours per week (making them eligible for retirement benefits) decreased by 23.0%,” the researchers said.
The results of higher minimum wages have had real negative consequences.
New York City had seen its worst drip in restaurant jobs since 9/11…and that started BEFORE the pandemic lockdowns.
Because the city—under the leadership of Mayor Bill de Blasio—raised the minimum wage to $15 an hour. The city saw its sharpest fall in restaurant employment in nearly 20 years.
In Seattle, the city council voted to raise the minimum wage to $15 an hour by 2021.
The results were predictable.
The University of Washington studied the effects of raising the wage to $13 an hour in 2016. The study found that companies responded by cutting low-wage workers’ hours; workers clocked 9% fewer hours on average and earned $125 less each month after the most recent increase.
University of Washington professor Mark Long said, “If you’re a low-skilled worker with one of those jobs, $125 a month is a sizeable amount of money… it can be the difference between being able to pay your rent and not being able to pay your rent.”
The road to hell is paved with good intentions.
Just because a policy sounds moral, doesn’t mean it is.
Minimum wage laws, and other government control policies, hurt the people they are intended to help.