I am intrigued by all the discussions about the minimum wage increase. It is a topic relevant in today’s economy; unfortunately I am seeing more cussing than discussing. There is a lot of passion behind people’s arguments but often not a lot of knowledge. In my situation, I have time to research and to think, a novelty in our society.
I am impressed with the number of people getting involved in the conversation. Let me give some advice if you are going to talk about this topic: In order to be taken seriously, manage your emotions. BTW: Excellent debaters win by making the adversary get emotional!
That will be our secret - Shhh. And, most importantly, it is ok to agree to disagree.
People are suggesting that the minimum wage should be a “living wage” implying that if a person works 40 hours per week at a minimum wage job, it should be sufficient to sustain them. Perhaps if our nation wants to be competitive in a global economy, we need to revise our thinking regarding the role of minimum wage. That is a whole other conversation so we won’t go there but you may want to contemplate that idea.
According to articles published, there will be a larger potential talent pool because as wages increase, jobs tend to become more attractive to seekers. In theory, a higher minimum wage may attract better qualified, more experienced workers. This implies that a business’s staff could be more skilled and more reliable, resulting in improved performance which will positively impact the bottom line.
Moreover, the increased talent level of the staff could also mean that fewer workers are required. My response to this is that day one, this may be true, a higher wage may attract more skilled and willing workers but unfortunately, as workers become accustomed to earning $15 per hour for menial work, that figure will not be enough to attract better workers.
I can also tell you from experience that higher pay does not alter a person’s work ethic. Either a person is determined to work hard and give a job 100%, or he is not. Increasing his pay by a few dollars an hour is not going to change how hard he works. It may excite him for a few weeks but once he becomes accustomed to that higher pay check, he will fall back into his old disgruntled behavior. I acknowledge that if basic human needs are not met and then a wage increase enables basic human needs (food and shelter, not the latest iPhone and gel manicures) to be met, there may be a level of stress relief that may infiltrate the work environment.
Another benefit stated in the articles is lower employee turnover. Higher wages can improve employee morale, and a happy employee is less likely to look for other employment opportunities than an unhappy one. According to research by the Department of Labor, higher wages dramatically reduce employee turnover. A business may pay a slightly higher hourly wage but in theory will reduce turnover and thereby reduce recruitment and training costs.
I agree with this statement at higher level pay positions. For example, if a business is known for paying top dollar to engineers, like Google, that company is going to attract quality applicants and retain a higher percentage of its engineers because they cannot go elsewhere and receive the same compensation. On the other hand, if an employee is in a minimum-wage job that he does not enjoy, $15 per hour is not going to make him stay when he can go to any other business in town and receive the same pay.
Another argument is that there will be increased productivity and customer satisfaction. The Federal Minimum Wage is currently $7.25/hour. In Washington, where we live, the minimum wage is $9.47/hour. Do you honestly believe that employees are more productive because they are getting more than $2/hour above the federal minimum wage? I don’t think that comparison even crosses their minds!
Some argue that a higher minimum wage will lead to economic stimulus. Minimum wage workers will have more money to spend with a higher minimum wage and that money will likely be spent. This in turn could lead to increased sales. Ok, I will give you that point; if people make more money, they will inevitably spend it.
1. Initially, there will be increased competition for minimum wage jobs. A higher minimum wage will likely intensify competition with overqualified applicants rivaling teenagers and younger, inexperienced applicants. While small businesses can certainly benefit from this shift, younger workers may miss out on the opportunity to acquire lifelong skills in an entry level job because older, more experienced workers will be more willing to take these minimum-wage positions.
2. There may be an increase in unemployment among the unskilled. The minimum wage imposes a wage floor that prices unskilled labor out of the market. Daniel Mitchell of the Cato Institute suggests that "businesses are not charities and that they only create jobs when they think a worker will generate revenue. Higher minimum wages are especially destructive for people with poor work skills and limited work experience. " With a higher wage, there is a higher expectation of performance. Unfortunately, simply paying someone a higher wage does not improve their work ethic or skill.
3. Employee morale will be negatively impacted. When Wal-Mart increased the minimum wage for a half-million employees to $15/hr, it had an "unintended consequence". It should not be thought of as unexpected, in fact, it is exactly what The Bloomberg Report said would happen. The more experienced employees who did not get a raise were unhappy that their newer, more inexperienced coworkers were being paid as much as or almost as much as they were. They put in the time and effort to get to their level of compensation and felt it was unfair to start coworkers off at the same pay. By the same token, within an organization today, there may be employees who are college graduates or long-term employees who are paid $20 per hour. Those employees may be content with their pay until a new hire with no education or experience is brought in at $15/hour. Will companies have to bump everyone’s pay accordingly to maintain a differential between senior/skilled employees and minimum-wage employees? Where does it end?
4. There will be an increase in automation technology. The thought of the implementation of a $15 minimum-wage made cost-justifying automation easier for a McDonald’s owner in Phoenix, Arizona. “protests getting worse every day The store’s new manager, Peter Gibbons, told CNN that he has worked with the robots at a product development facility in San Francisco for the last six months and speaks highly of the machines. “These things are great! They get their work done in a fast and orderly manner, plus they don’t ask for cigarette breaks.”
37-year-old Paul Horner, a spokesman for McDonald’s told reporters that because of the demand for a $15/hr minimum wage, the company has been playing with the idea of a restaurant run entirely by robots for years and believes their “Microdots” are the answer.
If you are upset by the thought of McDonald’s eliminating minimum-wage jobs and replacing them with robots, you can watch this video: https://www.youtube.com/watch?v=dAuQ5yzV9Lo
She was wondering why people who can afford a smart phone would be looking for work at Wendy’s. Mind you, my mother-in-law is financially secure, probably because she has been careful with money her whole life and she still uses a flip phone (as does my wife). This brings up a question of what the necessities are that the “living wage” needs to cover.
5. The cost of goods will inevitably increase. My wife began a small baking business about three years ago. The business is very labor-intensive and pays minimum wage to its employees. The business operates on a small profit margin appropriate for its industry. My wife ran the numbers and said if the minimum wage increases to $15/hr, her cake bombs which currently retail for $3.25 each would have to increase in price 18% or $3.84 each. That is assuming that none of her suppliers need to increase their costs as a result of the minimum wage increase.
Hopefully, you can see how detrimental this increase will be to small, labor-intensive businesses. Of course, if we had a technical business such as an engineering consulting company, the impact on our business of an increased minimum wage would be negligible. Hmm… perhaps we need to be heading in a more technologically advanced direction…
Basically, businesses are in business to make money. When they cannot do that given the wage constraints, businesses will do one of three things: close, automate or move to a country with more favorable wages.
Capitalism vs Socialism
I take a risk and start a business. I put myself into debt to get things going. I could make a lot of money or I could lose everything. It is up to me and perhaps it should stay that way, including what I determine is reasonable to pay my employees.
On the other hand, I start a business in a socialistic society. it makes money and the government wants to control the distribution of the earnings. Is this where we are headed?
Although it is entertaining to hear comments on this subject, I believe that only business owners have valid input. It would be like me offering my opinions on the best way to give birth! Just because I've seen it done certainly doesn't give me the same amount of knowledge as my wife who has experienced it firsthand!