Posted by
Ryan Hawkins on Friday, July 10, 2009 10:53:00 PM
Before I get into how ludicrous it is to keep raising minimum wage, let me first state that I am 100% supportive of finding ways for everyone to better their lives and earn better wages...I would just rather have the individuals do things to make their raise a merit-based raise rather than have it dictated by the government.
Unfortunately, raising the Federal minimum wage hurts more people than it helps...especially in these tough economic times. Jobs that pay minimum wage do so because the jobs are low-skill and just about anybody could do them. Those jobs are easy to fill because there is a high supply of people with qualified skills for the job. As the requisite level of expertise, qualifications, and responsibilities for a job increase, so does the pay because the pool of people who are qualified to perform the job is getting smaller and smaller up the chain. If you raise the minimum wage, then simple economics dictates that you must also provide incremental increases to each person up the chain. Allow me to illustrate:
- John is a dishwasher making minimum wage of $6.55/hour
- Alan (John's supervisor) is an assistant line cook who makes $7.25/hour
- Mark (Alan's supervisor) is a line cook making $8/hour
- ...etc.
Congress then decides minimum wage needs to be raised to $7.25/hour...so John is now making the same wage as his supervisor - Alan. Is it fair for John to be making the same wage as Alan? (Remember, Alan has more responsibilities and spent additional time & money obtaining the qualifications for his job.) Alan is going to demand $8/hour, which pays him the same as his supervisor - Mark. The chain continues upward. If all these employees are part of a union, then it is really party time! Everyone will get an un-merited raise faster than I can say GM!
If you are the restaurant owner, you are already trying to do everything you can to weather the storm in these tough economic times, but (thanks to the government) you now have to give out a bunch of raises whether the raises are merited or not. Your budget (which has already been tightening down due to lower revenues during the economic downturn) is already as tight as it can get, so you can't cover the salary increases with cost-cuts somewhere else. What are your choices?
The easiest, most feasible, and most common option is to keep your total salary costs at present levels by eliminating John's position (although asking for a government bailout is probably the next most popular choice.) You draft up a memo to redefine job responsibilities. John gets laid off...his supervisor (who one year earlier worked his way up from washing dishes for minimum wage) is back to washing dishes for a slightly higher minimum wage, and the restaurant goes on operating leaner and meaner with heavier workloads . You continue operations with less employees so that your overall salary cost has taken as little impact as possible.
Instead of John's wages getting bumped up, John is now unemployed and congress has hurt the very person they were trying to help. John and his fellow dishwashers had better hurry and find another job fast because the restaurant (along with every other employer) will eventually raise their prices to cover the wage increases. The cost of living notches upward and a short while later, even the increased hourly minimum wage will once again barely buy him lunch at Taco Bell.
Some employers will find a way to keep people like John on board; but unfortunately, experience has shown that more "John's" will lose their job than not. It is also noteworthy to point out that the majority of people working for minimum wage are young (many times high school age) individuals who aren't depending on their wages to put food on the table or a roof over their heads.
Raising the minimum wage is not a solution to anything - it only compounds the problems we are experiencing in the economy. If you thought you were safe from the next round of layoffs, you'd better watch out after July 2009 because there's another curve ball coming at your employer when minimum wage goes up.