My pantry is tidy and logical.
My argyle is terrible.
But #1 daughter called me yesterday as I worked on these things to discuss an issue coming up on our ballot next month: minimum wage.
The minimum wage could increase by 50%. On the surface, this seems like an obvious good thing. Th legal minimum wage should be an amount of money that a person could live on. It should keep up with inflation. Every human being is worth that $11.50 an hour or even the $15.00 that is the eventual target. $15.00 is the starting wage for our company.
But we’re wondering about the real world effects.
First of all, very few people work for minimum wage: 2.3% of hourly workers, according to the Bureau of Labor Statistics, and they should know. That’s much less than 2% of the population, since just about half of workers are hourly.
Most of those people do not live in poverty. They are not the breadwinners for their households. Most are white women and more than half are 24 or younger. A quarter are teenagers. Most work part time. In general, these are after school jobs for pin money. There are adults working full time for minimum wage. However, they will get better opportunities… or they need to improve their skills so they can get better opportunities.
Evidence from states and towns that have raised their minimum wages show that two things tend to happen: some people lose their jobs, and some people get their hours cut.
That makes sense. There’s nothing about raising the minimum wage that will immediately increase a company’s revenue. The amount a company spends on wages depends on revenue. It’s not just based on how much the owner feels like paying.
If I have three full time minimum wage employees and the minimum wage goes from $7.25 to $11.50, I have 75 hours’ worth of labor in my budget rather than 120 hours each week. If I need to keep my labor costs the same, I could probably come up with an extra five hours’ worth somewhere and keep two of those workers. The third worker I will have to let go.
The remaining two will have to up their productivity to make up for the loss of their colleague. They’ll have a big raise, though, and might have more disposable income. Assuming that a lot of businesses take this approach, it’s hard to see how the good fortune of my hardworking two employees will translate to an overall increase in revenue. In fact, if they can’t up their productivity to continue taking good care of my customers, I may lose customers.
If I had the kind of small business that relies on minimum wage workers, I’d automate my restaurant. I’d shut down my small retail shop and switch to ecommerce. I would absolutely have to let people go.
This kind of small business, and perhaps the entire fast food industry, would be harmed by the rise in the minimum wage. Large companies could afford the rise in wages, however. They could tolerate lower profit margins or take the cost out of the C suite’s bonuses. The people let go by small businesses could go work for big businesses at the new minimum wage. It would be unsettling, but they’d be better off in general.
#1 daughter says no. The people who’ve been earning $11.50 will no longer be happy with that wage. Everyone between $7.50 and $11.50 will get a pay rise, not just those earning minimum wage, and that’s a lot more people. Wages in general will have to increase to meet the increase in the minimum wage. Costs will rise, and everyone’s buying power will stay about the same.
Economists say that prices don’t actually rise when the minimum wage increases. Prices don’t rely that much on wages. Industries affected would be restaurants, especially fast food; retail; and agriculture, which is a whole other story. Price increases and company closings in those two areas might not matter much to civilization. People might choose to cook at home or to shop online.
UC Berkeley researchers say that the negative effects of minimum wage — job loss, higher productivity requirements, and higher prices — are balanced by lower job turnover and increased purchasing power. Some people lose their jobs or their businesses, but many people benefit. The economy as a whole isn’t upset as much as you might think.
I will vote for it, on principle. We’ll see what happens.