Increasing the Minimum Wage is More Harmful Than You’d Think
Would You Risk It?
By Zoey Reade
Over the last few years, protesters have taken to the streets, marching and carrying their signs advocating the “Fight for $15” demonstration. Even Amazon is joining the conversation, announcing on October 2 that they will raise their minimum wage to $15 and plan to lobby to raise the federal minimum wage.
A little extra money never hurt anybody, right? Well, maybe it can.
Minimum wage might not be as great as we all expected. There can be more risks than some may think. But how can raising the wage hurt the economy? And how does it affect you?
First, let’s get something straight. There’s a difference between increasing the minimum wage to match the country’s inflation rates, and increasing the minimum wage to an ample $15 an hour. Raising the minimum wage to match the economy’s inflation rate is necessary. In 1990, the minimum wage was $3.80. Now it’s $7.25. In that period of approximately 30 years, the inflation rate had doubled, making it necessary to increase the minimum wage as it corresponded to increased prices set in the economy.
However, jumping up to $15 an hour can have negative affects on the work force. “If we were to make a national minimum wage at $15 an hour, that’s a big jump,” said Zebulon Riley, professor of economics at Southern Virginia University. “That would likely have some effects…like unemployment. A lot of people would like to work at $15 an hour, but a lot of firms would find other ways of getting the job done besides using workers.”
One big reason the unemployment rate would escalate is because of unwanted, low-skill workers. As an alternative to low-skill workers, firms will hire high-skill workers or find ways to replace labor (i.e. using self-checkout lines instead of cashiers). “If you increase the minimum wage, you make low-skill workers more expensive,” says Riley. He adds, “If you make low-skill workers more expensive, it is now cheaper to hire the [high skill workers] relative to the low-skill workers.”
So, if you are a low-skill worker — like a student working part time at the minimum wage during school — you could possibly be out of a job. James Dorn, a writer for Forbes, remarked that, “Workers who retain their jobs are made better off but only at the expense of unskilled, mostly young, workers who either lose their jobs or can’t find a job at the legal minimum.”
Raising the minimum wage nationally, could potentially harm some areas of the United States more than others. “It’s going to depend on which state you’re looking at,” Riley acknowledged. “If you implement a $15 an hour minimum wage in New York, the unemployment effects are going to be small.” However, what if you take a less dense state, such as Mississippi? “Half the state’s out of work,” Riley pointed out.
This is due to the fact that most of Mississippi’s work force are those who may not contribute enough revenue for their firms, which would make it difficult for them to maintain their jobs. Even in larger cities where the minimum wage has been increased to $15 an hour, companies can be found using alternatives.
An example given by Riley is the state of Washington. When the $15 an hour wage was implemented, McDonalds began to use the touch screen kiosks as an alternative to hiring workers. Now those kiosks are slowly being implemented in McDonalds across the United States, which ultimately means more unemployment in that field.
Now Amazon is raising their minimum wage, but what makes them different from McDonalds is that they are encouraging a national raise of the wage to $15.
Jeff Bezos, whose current net worth is $165 billion, can afford to pay his employees $15 an hour. Like Riley mentioned, there will be little to no effect there, simply because of the surplus of money and because most Amazon employees are already paid $11 an hour and above. However, what will happen to the little companies across the United States? With the minimum wage rising beyond that of the inflation rate, it will be increasingly harder for the entrepreneurs and small company owners to keep up with the big leagues.
Slowly, Amazon has been closing out companies such as Toys “R” Us and Sears as it continues to take over the shopping world.
Increasing the minimum wage is a gamble…would you risk it?
