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The $15 minimum wage benefits the wrong people

The $15 minimum wage benefits the wrong people

The $15 minimum wage benefits the wrong people
July 15
12:00 2021

Many people are wondering if a $15 minimum wage can bring back American small businesses and the middle class. The opposition of the $15 minimum wage is deemed greedy and a Republican talking point to keep people down. 

After all, if a business cannot afford to pay its workers a living wage, it should not exist, right?

Unfortunately, that is not the case. Imposing a $15 minimum wage has its consequences such as reduced employment for teenagers/young adults, unskilled workers, workers with limited work experience, disabled people and cuts profits from small businesses

The benefits of the proposition help employ able-bodied people, skilled workers, people with multiple years’ worth of work experience and large corporations earn more profits.

To break down what this means, let us understand the basics of wages and production. Wages are another word for labor costs (when the price of labor goes up, prices of goods and services must go up in order to profit). In short, the more expensive it costs to produce something, the higher you must sell it.

Entrepreneurs and business owners maximize profits by keeping labor costs low because labor is an expense. To maximize profits expenses need to be small and minimized. As the current minimum wage is $7.25, costs of labor will double per person for businesses if a national $15 minimum wage were passed. 

This is when the dangers of raising the minimum wage show. If a national $15 minimum wage is mandated, costs of labor for all businesses go up and it takes more money and resources to keep people employed.

The biggest winners of a minimum wage increase are corporations like Walmart, Target and Amazon. Large corporations have the money to adjust to the new laws and will lay off employees who do not meet the production requirements of a $15 value. 

Companies with billion-dollar or more profits see a minimum wage increase as a little paper cut. Small businesses, however, see it as a bullet wound. 

They are the biggest losers in a $15 minimum wage scenario. Small businesses might not have the money to afford to keep all of the previous workers and buy the expensive machinery or equipment to replace human workers. 

Big businesses fear a small business offering products and services at a lower cost, not increasing wages. It is the small business owners who fear increasing minimum wages. A business that offers goods and services at a lower cost gets the most business, no matter how big or small. 

Looking at production, employers in a minimum wage system need to find the best candidates possible who offer a higher value than their labor costs. This means they need to hire the most productive person who brings as much or more value as the $7.25 per hour. 

If an individual only brings a $5 value per hour value while paid $7.25, the -$2.25 is an extra expense to a business. For large corporations profiting in the billions of dollars per year, the $2.25 loss per hour is irrelevant, but for a small business, it can cause long-term harm.

Now imagine if someone is paid $15 per hour doing a job not bringing in a value as much or more. The marginal cost of a $15 per hour worker is a huge liability to a small business and that person drains their expenses. The large corporation will buy machinery or capital to replace the human worker. 

In a $15 minimum wage mandate, employers need to find the best worker possible to bring the most value to the job. Teenagers looking for their first job or college students working their way through school with limited work experience are at a disadvantage. Someone with no work experience has to compete with people who do have work experience. The most productive people are people with more experience and training. 

Put yourself in the shoes of a business owner. If there were a national $15 minimum wage, and the applicants for a job are between an 18-year-old with no work experience and a 28-year-old with 10 years of work experience, it is obvious to go with the 28-year-old. The 18-year-old has no ability to undercut (meaning accepting a lower wage to negotiate to get the job) the 28-year-old and a job opportunity is taken from the 18-year-old’s hands. 

A $15 minimum wage puts businesses in a position to cross disabled individuals off of the candidate list because able-bodied people will be more productive than disabled or people with health issues. Let’s say a 50-year-old person with a family is laid off from their career job and needs to find a new one to put food on the table temporarily. A $15 minimum wage makes the 50-year-old less desirable than someone between the 25-and 30-years-old who is likely to be in better, healthier shape. 

In defense of the $15 minimum wage proposal, it would lift millions of struggling American households in small and mid-size cities, according to a study by the Brookings Institute. Since 2009, the Social Security’s Cost of Living Adjustments within the United States is up 16.5 percent since the current minimum wage was adopted.

On the contrary, the rising wages in a $15 per-hour scenario as mentioned are good for existing employees but are bad people entering the job market or people who were laid off as a result of businesses cutting labor costs. If every business in the country were forced to raise wages at $15 per hour, 1.4 million people are expected to be unemployed by 2025. 

As a believer in the free capitalist system, I accept new technology and tools to produce products and services in a cheaper and more efficient way will inevitably replace human workers. But a minimum wage increase will make the demand for human labor lower and self-serve kiosks will be the new gold. 

If I were an executive of a large corporation, I would call and write to my local politicians begging for legislation on a raise in minimum wage saying, “Please (Senator/Congressman/Congresswoman), I’m begging and praying for you to pass a minimum wage law.” Although it is a well-intended note to the politician, what it will likely do is eliminate competition from small businesses and only help my cause. 

In my opinion, people who work really do deserve an affordable wage to buy a house, car, have significant time away from work and enjoy the things they love. However, it is not easy for employers to afford every employee a living salary with benefits while maximizing profits. 

The next time you see debates and conversations on the minimum wage, keep in mind the winners and losers of the proposition because it does not always fit the mainstream view.

Featured Illustration by J. Robynn Aviles

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Preston Rios

Preston Rios

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