Minimum wage

Raising the minimum wage won big last November. A handful of states passed legislation to significantly hike pay floors across the country, which may represent a building sea change in public opinion away from business interests. From New York City to Seattle, the “Fight for $15” is increasingly becoming a reality. Twenty-nine states and the District of Columbia now have higher minimum wages than the federal mandate of $7.25 an hour.

Advocates of the hikes say the wage floor has lagged far behind cost-of-living expenses for the better part of five decades. The high-water mark was 1968, when it hit $11.10 an hour in today’s dollars. With more expendable income in workers’ pockets, the advocates say, they transform into consumers dumping that additional income back into local economies.

Last year, Costco raised its base pay for entry-level employees for the first time in nine years. The company estimated the move would cost investors two pennies a share over the next three years. “It’s like chicken soup,” CFO Richard Galanti said during an earnings call in March. “It can’t hurt.”

But other executives say higher wages could cause serious headwinds for their companies — especially in industries like retail, hospitality, and food service that employ many low-skilled, low-wage workers. A Duke/CFO Business Outlook survey from July 2016 found that 32% of respondents were worried about potential wage hikes, making it a top-five concern.

Opponents fear higher labor costs will be passed on to consumers or will force companies to cut jobs to absorb the additional expense. Employers likely would cut the lowest-skilled jobs altogether or invest capital toward automating those positions, thereby hurting the very workers the hikes were meant to protect.

In the short term, experts on both sides believe job cuts could be a real possibility. But what effects will minimum wage increases have on employment and the economy down the line? Should private enterprise be responsible for boosting low incomes? Should government programs help shoulder the burden?

Here, four experts weigh in on the reasons for wage hikes and what they could mean for employers, workers, and the economy at large.

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3 responses to “Square-Off: Is Raising the Minimum Wage a Good Idea?”

  1. Like the rise of the two-income household, all an increased minimum wage will ultimately do is make living more expensive. Prices will shoot up, and those at the bottom will still find themselves at the bottom.

  2. I don’t believe that the government should be involved in setting a minimum wage. I do not agree with the standardization of a minimum wage in that the broad spectrum and differences in standard of living from one state to the next is to great for us to consider on the macro. I believe that minimum wage should be governed by the people of individual communities. Community leaders no more or less the making of each individual economic standings. Not saying this is foul proof, but this is a start for local business leaders and community members to have a voice. Even state mandated minimums may be a better gauge.

  3. $15 minimum-wage is de-facto racist!
    The unemployment-rate of young African-Americans, ages 16-19, (males: 30% and females 20%) is much, much higher than ANY other group – of any age, sex, race, ethnicity, et al.  Any inherent talent or skills these kids possess has zero wage-value, UNLESS someone needs such abilities and is willing and able to pay for them, and the two are able to make a deal beneficial to both.  
     
    These youngsters need paying jobs to gain work-experience and habits to build lives not involving chronic unemployment – or prison.  The longer they are unemployed, the more difficult it will be to get hired.  That is a societal cost that should not be required, especially by our government.
     
    Nationally, Food-Service businesses provide most of those jobs. They pay $8-$10 per hour (Fed. gov’t. data).  If these youngsters’ skills do not warrant even these pay-rates, how, pray tell, does $15 make them more employable?  A mandated minimum-wage says that even if an employer and the young person agree at $10/hr., or even $8, no job can legally be offered nor accepted!  Thus, zero wages and frustration!  Why is that acceptable governmental behavior?
     
    More Federal government data: Food-Service industry labor cost is 30% of total business costs. Net income, after paying all expenses, averages 3% of revenues.  $15/hour (50% over present $10 average wage), raises labor costs to 40-45% of total cost, and raises overall costs to over 110+% of total revenue. So, no business net-income.  That’s not good.  Raising prices by 15-20% to make up for the wage increase cost may well prompt many customers, the ONLY source of moneys to pay wages (or anything else), to say “Fuggetabadit”.  
     
    The employer will then be forced to reduce employment, eliminate a service, automated a task, somehow get employees to become more productive – or…. go bust.  Remaining jobs, if any, now at $15, will attract greater-skilled workers, e.g., retired people who might not be tempted at $10 but would at $15.  Competing against such long-skilled workers does not favor youngsters struggling with the basics of being employed, e.g., showing up on-time for work, dealing with customers, filling out time-sheets, working in a team, etc.
     
    Laws mandating disparate adverse employment-impacts on these teens effectively equate to flat-out government-enforced racism.  How so?  Long-standing Federal labor laws clearly state, “disparate impact holds that employment practices may be considered discriminatory if they have a disproportionate adverse impact on…a protected class.”  These youths are in such a ‘protected class’ and the high minimum wage is a clearly difficult ‘adverse impact’ wall. 
     
    Simply declaring something ‘good’ without considering entirely-predictable negative ramifications, i.e., government-mandated reduction of job opportunities, is socially irresponsible, a waste of emerging talents, and plain bad public policy.  A $15 minimum wage law creates yet one more (big) barrier for these kids preparing for a work life.  Wage payment equity must be balanced with employer ability to make an adequate investment return – and all are subservient to a buyer willing to buy.
     
    Congressional Business Office (CBO) warning: 500,000 jobs will be lost if the Federal minimum-wage rises to $10.  If such be the case, how might $15 miraculously add jobs?  Forcing such a raise assumes dollars are readily available.  What if there… isn’t? What if the employer can’t raise prices or cut costs enough?  What if a business that would create the jobs never opens?  The what-ifs count.
     
    If $15 is assumed to be good, how about $30?  California could then claim it “leads the nation”.  Best of all, these teens will never even be aware they were ‘had’ by this insidious law.  In truth, the main beneficiaries to the higher rate are those already employed, not these kids with no income.  The minimum wage effectively eliminates competition presented by these eager young people by not allowing them to enter the work-world.
     
    Of course, staunch advocates, not affected by minimum wage laws, will raise a glass of pinot noir of an eve to congratulate one another on their beneficence should the $15 become mandatory. 
     
    Such is California.  
     

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