The whole concept of a minimum wage is deeply flawed because it says to employers and potential employees that even if there is a price they are willing to agree on to engage in labor, if it’s not high enough, they’re still not allowed to do it. In other words, if I am willing to pay you $8 an hour to hand out flyers, make hamburgers, or greet people entering a store and you are willing to take that wage, why should the government step in and say, “that’s not high enough, so it’s not allowed?” It’s even worse in Biden’s case because he actually wants to DOUBLE the existing minimum wage of $7.25 to $15 an hour. This is a particularly dangerous move given the cataclysmic damage the government’s overreaction to COVID-19 has done to the economy. Per Yelp, 60% of the small businesses that closed because of the coronavirus are now permanently out of business. Should we really be hitting the survivors of that culling with something like this? However, let’s say Joe Biden gets his way. What will happen?
1) Inflation: Raising the minimum wage to $15 an hour is a recipe for inflation, particularly in areas where the wages are already low. If the guy making $7.25 gets $15.00, then the guy that was making $15.00 is going to demand $22.50. Who’s going to pay for all this? That would be YOU after the business owners quite understandably raise prices to cover costs. If it didn’t work that way, we could raise the minimum wage to $1,000 and all of us could buy big houses and sports cars. Unfortunately, there is no free lunch.
2) Jobs will be lost: When I was young, I used to be a Burger King assistant manager. We had a guy there whose only two skills were basically mopping and making burgers at about 75% of the speed of other employees. Do you know what happens to a guy like that in a $15 an hour world? At best, he gets fewer hours. At worst, he gets fired or not hired in the first place. Why? Because if you’re not bringing $15 an hour worth of value to the table, you’re a money loser and a business is not a charity. Why distort the market in a way that is guaranteed to harm the lowest skilled workers?
3) It means younger workers will be less skilled: A lot of people currently working minimum wage McJobs are high school kids who quite understandably, don’t get paid a lot because they have no job experience and don’t bring much to the table. So, what happens if those starter jobs go away? These kids don’t get that early work experience, which makes them even less valuable to future employers and less ready to enter the workplace. What’s the long-term economic benefit of creating a vicious cycle where it’s harder than ever to get a job without experience, but it’s simultaneously harder to get that experience?
4) It will spur on efforts to replace low-income workers with automation: Many of us have probably been to a supermarket where we scan our own groceries and pay for them. I went on vacation earlier this month in Las Vegas at a conveyor belt sushi place. Basically, you picked out the food you wanted on a screen, it came out to you on a conveyor belt and you dumped the plates down a slot. There are now robots that can flip burgers and table ordering systems can go a long way towards replacing waitresses. Robots that can scan shelves and move stock in a warehouse also exist. The more businesses are forced to increase their labor costs, the more practical it becomes to spend more money on automation to get rid of those labor costs entirely. This could dramatically speed up the process of putting large numbers of low-income Americans out of work.
5) It will drive some small businesses under: Businesses across the country have taken a terrible beating over the last year. They’ve been forced to shut down. Some of their customers may have avoided them out of fear of getting COVID. In other cases, they simply haven’t been able to fully open at all because the government has refused to allow it. Now, after all of that, Biden is going to take these struggling businesses and hit them with potentially huge new costs. Unquestionably, a significant number of these weakened businesses will go under. Why would anyone think that we’d be better off as a country without these businesses along with the tax dollars and jobs they provide simply because they are unable to pay their employees an amount of money per hour that politicians have arbitrarily decided is good?
John Hawkins is the author of 101 Things All Young Adults Should Know.
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