Raising The Minimum Wage Is A Horrid Idea
While there's a lot of talk about it, what we need to discuss is whether it's even needed.
The federal minimum wage is quickly becoming a hot topic. President-elect Joe Biden has vowed to raise it to $15 per hour, more than doubling it from the current minimum wage of $7.25.
Proponents have argued that since people cannot support a family on the minimum wage, it needs to be raised. After all, they argue, it’s not right that someone has to work two jobs in order to raise a family.
Of course, opponents take issue with that characterization, but we’ll get to them in a bit.
Lately, proponents of the raise have taken to Twitter to tell us all about how it’s a great idea.
Yes, people really are that stupid.
See, what people don’t understand is that businesses that can’t afford to pay employees simply won’t. They’ll either contract with someone else for the service or the owner will just do it themselves. Being able to pay a certain wage is never and has never been a requirement to own and operate a business.
But this is far from the only idiotic example of “arguments” being put forward.
Try this one:
The thing is, no one begrudges anyone making $31,000 a year. No one at all.
But the issue is that all of this poorly frames minimum wage workers. Everyone screams about raising the minimum wage, but few actually understand the minimum wage.
First, let’s understand that remarkably few people actually earn the minimum wage. In fact, it represents just 2.3 percent of all workers in the United States. That’s 1.8 million people in a nation of 328 million.
Now, we can all see that the number of minimum wage earners is only a tiny fraction of total workers. Yet what matters is that we look at just who those workers are.
According to the Bureau of Labor Statistics, over half of those who make minimum wage are workers under the age of 25. In other words, young workers with few job skills.
So what happens if you raise the minimum wage to $15 per hour?
Well, let’s start by understanding that while some major companies can easily afford to pay $15 an hour, not everyone can. Just over 47 percent of all people are employed by small businesses, which means that many people are working for companies without billions in profit that can easily lead to higher wages.
If the minimum wage is raised, at least some of these small businesses will have to adjust. They’ll either raise their prices or, more likely, lay off some employees. Further, they’ll be less likely to hire first-time workers who have few skills to warrant $15 an hour.
They may want to give people a shot, they just can’t afford it.
Further, while people like to look at the McDonald’s worker as the typical minimum-wage employee, they don’t really understand what they’re seeing. After all, McDonald’s is everywhere. They can afford to pay more, right?
You see, the McDonald’s you hit up isn’t likely to be owned by the corporation. It’s a franchise, which means someone bought the rights to use that name. Most likely, it’s a small business owner who is paying $45,000 a year and 4 percent of gross revenue to the corporation. That means the corporation gets paid first, leaving the rest to cover costs such as labor.
Raising the minimum wage isn’t going to help those workers, it’ll hurt them. It may make it more profitable for those small businesses to spend the money on kiosks and other forms of automation and reduce their workforce to the bare minimum.
And these are businesses that are benefitting from McDonald’s massive national marketing campaigns.
A lot of other small businesses have no such good fortune.
Besides, for all of this talk of the minimum wage, few places are actually paying minimum wage to their employees.
The BLS reports that of all wage earners paid by the hour between the ages of 16-19, only eight percent earn the minimum wage. Just eight percent in the group most likely to earn the minimum wage.
The takeaway here is that employers are offering higher wages than legally required already in many cases.
This fits with what I see. My son got his first job in 2020. He was enrolled in college with no marketable skills. He got a job working at a retail store where he started at a pay rate almost 50 percent greater than the minimum wage.
So this raises the question of just how pays minimum wage.
Well, those who can’t afford to start people off making more, mostly. In other words, small businesses with smaller margins that can’t afford to cut into it with higher wages.
It’s easy to believe that these people can just pay people more, as the above-linked tweets suggest, but that’s not how it works. Running a business is difficult enough, but it’s downright impossible when you have to somehow will more money to pay people a higher wage.
None of this even looks at the ridiculousness of the initial argument, that minimum wage workers can’t support a family on their income.
As we’ve seen, there just aren’t that many people trying to do that. Most of those 2.3 percent of all wage earners aren’t supporting anyone, often not even themselves. These are first jobs for a lot of people, people who often still live at home.
Further, if someone does have a family and they’re trying to support it on minimum wage, we have to ask just where the hell did they screw up?
It’s not popular to point this out, but if you’re trying to support a family and you’re only making minimum wage, it’s really on you.
As we’ve seen, a tiny fraction of workers earn minimum wage, which means that if someone is only making minimum wage, it’s either a short time before they’re making more or they suck so badly at their job they’ll never make more than that.
Further, let’s insert a family into the mix.
Those most likely to earn minimum wage are younger workers, those who are often too young to have a family. Besides, the BLS notes that only one percent of hourly employees are married.
In other words, almost no one is trying to raise a family on minimum wage. That’s especially true when you realize at least some of those minimum wage workers are married to people who make more than the minimum wage. After all, more than half of all families are two-income families these days.
For all the screaming, wailing, and gnashing of teeth, we see about the minimum wage, it isn’t nearly the issue proponents claim.
Yet those same proponents ignore that a business will only have so much to pay employees, and if you raise the cost to pay those employees—and doubling the minimum wage will increase the number of minimum wage workers—beyond what they can pay, something’s got to give. That will be either people getting laid off or prices being raised, none of which ultimately benefit the working poor.
Oh, there would likely be a number of people who will be glad to tell you just how much better their life was after the hike. They’ll be all over the news.
What you won’t see are the people laid off or, if you do, it’ll be framed as how businesses are screwing people over rather than lay the blame precisely where it belongs.