Why Increasing The Minimum Wage Will Do NOTHING For The United States Economy

Minimum wage has become a hot-button topic in politics over the last two months or so. Obama wants minimum wage to be $10.10 across the nation, it is understandable why this situation is debatable. However, is the minimum wage model increase workable in today’s economy? Hiking it up to $10.10 per hour seems like a dream come true, especially for high school kids, people who did not graduate, and the such. But does it really help our economy?

Increasing The Minimum Wage Hurts Young People

According to Senate Republican Council Committee, increasing the minimum wage will hurt young people. First, minimum wage hikes will definitely those entering the career market through entry-level positions. For example, if an employer hires an entry-level person at $11 per hour as the basic entry-level pay, but finds out the person made more at a fast food restaurant, that will actually hurt the prospect’s chances of getting hired. Now employers are willing to understand certain conditions, such as someone getting paid $15 at a grocery store, they’ve worked at for ten years. That makes sense. However, if someone only worked at a McDonald’s or Burger King for a year, and make more than the entry-level position start pay for what they are applying for, well… it isn’t good. Not to mention, most young people have the “I know everything” attitude, and will argue their pay, even for entry level.

Second, minimum wage increases tend to make employers hire experienced workers over entry-level workers. If an employer is going to hire someone at $10.10 – despite it being the new minimum wage – then they better be experienced. This catch-22 will cause young people to constantly search for new jobs, but probably never find a real career.

Increasing The Minimum Wage Hurts All Workers

Going back to what the Senate Republican Council Committee said, minimum wage hurts all workers across the field. First, businesses – in which most have a transactional mindset – see worker wages as a cost. The transactional mindset states that both parties are in agreement on what needs to be done. The worker works and gets his task done, the employer pays a specified amount of money. That’s the transaction. However, if the transaction has been adjusted in favor of the worker, it may cause issues not just for the employer, but the worker as well.

Using this imaginary model, let’s say the minimum wage at a shop is $7 per hour. Everything in the budget is balanced but is on a basis that the optimum number of workers at certain pay is hired in comparison to other costs and profit. Then the big bad government mandates that minimum wage is now $10 and not increasing it to that point is illegal. The output is still the same but now the costs have increased, ergo, in order for the company to make a profit again, they are going to have to cut costs. What is the #1 most expendable cost in a business? The answer is workers. People lose their jobs, then the remaining workers have to pick up the slack. At least they are earning their $10 right?

Also, minimum wage increases destroys minimum wage jobs. Going down the line, movie ushers, gas station attendants, dishwashers, fast food attendants, and many other minimum wage jobs no longer exists, just because minimum wage increased and employees have said it is too much of a cost to have these type of jobs around.

Increasing The Minimum Wage Hurts The Pricing In Economy

This is more of a macroeconomic view, but it is important nevertheless. Fee: Inspire, Educate, Connect does a great job analyzing this in a very-detailed report, but I will break it down in much simpler terms. In the above reasons why minimum wage hurts all workers, we detailed it on a microeconomic level, which is the business by itself. Macroeconomics is all the businesses in a town, city, state, or country that work together economically. Now tell me, what would happen if all the businesses are told to increase their minimum wage jobs to the mandated increase the government has issued? All of the businesses are going to have an increase in costs, ergo cost cutting will occur mostly through restructuring.

Now termination isn’t the only scenario available for a minimum wage increase in society? There are others and they are not good either. Some employers may believe in employee loyalty and will do all they can to keep their employees in a minimum wage increase situation. So this means cut benefits in spite of an increase, or an increase of the price on goods. The price hike on their output may mean an increase on their profit, but that also means the consumer’s costs just went up too. Sometimes, businesses produce goods that are raw materials for another businesses so they can produce their product. So across the business board, the minimum wage increase just increased costs for all businesses.

Not only does minimmum wage hikes increase business costs, but personal everyday-day life costs increase too. Let’s say a bread factory, that originally paid a $7 minimum wage, has to pay the minimum wage mandated by the government. Let’s say they don’t want to let people go. Where does the increase go to make up the added cost? The product, being bread. Who eats bread? Everyday people in their everyday lives, especially those who enjoyed their sudden minimum wage hike. Unfortunately, they won’t be able to enjoy the minimum wage increase because bread is now $8 from $4, movie tickets are now $25 from $10, milk is now $10 per gallon from $4, and so on.

Personally, minimum wage eventually needs to increase. It does state that minimum wage is the minimum someone needs to make to survive on their own. How long has it been since somebody survived on their own with just $6 an hour? That is why there are so many reports of minimum wage increases across the nation, especially in Seattle, which is now $15, which was reported here on The Inquisitr. However, forcing companies to increase their minimum wage is not going to work.

The only way a minimum wage increase can happen is if it doesn’t effect the costs. What that means is that it can only work if the business is making a surplus. Not just a profit, but a surplus of profit which can be redistributed through a minimum wage hike. If businesses did think on a transformational level, surpluses would exist more, and our economy wouldn’t be in the situation we are in right now.