A long-time friend, Jim Blasingame, who is a well-known radio commentator, business writer and small business expert has recently written a thoughtful article making the case that the soon-to-be-considered $15 national minimum wage is a bad idea, and he gives 10 pretty compelling reasons to back up his position. (Read his article here)
Jim’s well reasoned argument tells us that it will hurt small businesses in most of the country, and ultimately hurt more workers than it helps. His argument may not have much sway on the low income worker who is working two jobs trying to support a family on $7 or $8 an hour, but if that worker’s employer can find a way to eliminate that job as a response to the wage hike, how does that help? When it all plays out, who wins and who loses?
What do you think? I’m curious to know how you feel about that issue, as it will soon be front and center in the news. If you will, send me a YES (it’s a good idea) or NO (it’s a bad idea) and tell me why you think so, and I’ll publish the results of my very unscientific survey here. AND THE RESULTS OF MY VERY UNSCIENTIFIC SURVEY ARE: 58% IN FAVOR, 42% OPPOSED.
Yes and No 😉
My biggest concern is the uneven playing field between states and the federal government. As a small DoD contractor in Los Angeles we have to comply with $14/hr minimum wage, soon to be $15/hr, while our competitors in the midwest and south pay the federal minimum wage of $7.25/hr. How are we to compete, not to mention the other higher local costs of doing business? Move to those locations? Not a practical solution -for my marriage ;).
Thanks for your thoughts, Dan. That is truly a dilemma that government action hasn’t been able to fix. The lower cost of living in Omaha makes a lower wage viable, even though they can make the same products you do, effectively for less money. $15 an hour in Omaha might fix that, although that would probably disrupt their costs of doing business significantly. Let’s not run for President until we can figure that one out.
To double the minimum wage will definately end up causing massive inflation. Bad.
However $2 increase might boost the confidence of the masses but yet not give the larger retailers the signal to raise prices drastically (as doubling wages would)….or better yet give the minimum wage earners a larger tax break instead.
This is what happens when you put a politician in office instead of a business man.
Thanks for your note, Tina. If only it were that simple across our very varied economy.
Hi Gene. I believe this will hurt many small businesses maybe most small businesses. However, I understand that it’s wrong for many people to work full time jobs making less than poverty level wages. For businesses unable to pass along wage hikes to their customers they will likely close. Maybe there are other methods to tackle this problem. Perhaps, the minimum should be different depending upon location. Also companies like Walmart and Amazon who have displaced many small businesses should be held to a higher standard and pay the $15 minimum while the surviving small businesses pay a lower rate or are eligible for a federal subsidy to pay the rate.
I like your thinking , Mark. It’s clear there’s no one-size-fits-all solution. Perhaps a locally applied definition of “poverty level wages” is an approach that could work. If you can develop that formula I’ll vote for you for President.
YES it’s a good idea. I don’t find the research in his article supports the claim that this will hurt small businesses. A rising tide (wages) will lift all boats. It’s not going to replace jobs, prices will rise. The minimum wage must catch up with inflation. Paying the minimum wage is not just an urban or big business problem
Thanks for your thoughts, Jonathan. I guess the unanswered question is how those minimum wage earners will cope with the rising cost of the things they buy that will be more expensive because of the larger wages paid to the maker’s workers. No easy answer to be sure.
Gene – I am a yes, good idea $15 min. wage because:
* While I believe in free markets, the lower end of the labor market is not free, since the workers are desperate to put food on the table so they lack any bargaining power;
* The 1 million est. job losses are from people working multiple jobs, not needed any more, so not really lost jobs;
* Below a working wage, the govt subsidizes with food stamps, etc. so we should not want the govt to subsidize corps for paying below living wages;
* Econ. studies I read put the balanced level of min. wage at about $15-17. I think Germany is in the $17 range.
* Long overdue IMO.
Thanks for your thoughts, Michael. I suspect the 1 million people who lost those jobs don’t really think of it other than “lost jobs.” Your statistics about minimum wage in other developed countries is very interesting, though. Perhaps that says it can work without major disruption if there is reasonable homogeneity among the local economies.
There has been a long-term trend toward automation in manufacturing, logistics, distribution and other industries. Autonomous vehicles, connected vehicles and truck-platooning are all coming. The question facing lots of industries is: when does the cost of labor exceed the cost of automation? A related question dominated the 1990’s: how does the cost of labor influence the disruptive forces of business process re-engineering and ‘organized abandonment’?
In the airline industries, even without automation airlines elected to go into bankruptcy to avoid pension costs (among other things). So it is easy to build an argument that increasing the cost of labor,, whether via minimum wage, collective bargaining or other mechanism simply accelerates the swap of labor to machines.
Ironically, for industries like bars and restaurants, machines are, in my opinion, less likely to replace servers. So a one-size-fits-all answer does not apply.
My guess is that plumbers, electricians, HVAC techs and others may be safe from the clutches of automation. But those providers are not typically in the minimum wage category, so probably not affected.
I bet a computer model could be crafted to generate any result an interested party might be willing to see. At the end of the day I am in favor of raising the minimum wage because the status quo is not sustainable for the workers, and if their job gets replaced by robots, then that probably will have happened anyway.
Thanks, Ramon. Lots of food for thought in your comments. Given that automation will proceed in any event – if for no other reason that its cost will decline while the cost of labor will likely increase – the minimum wage will simply accelerate the future and make living easier for the minimum wage earners (MWEs) in the meantime. The small fly in the ointment is the inflation cost of the minimum wage pushing up the wages of those just above the MWEs, thus impacting over time many workers who earn above the minimum wage.