Can America Survive a $15 Minimum Wage?

To paraphrase the great John Houseman, I grew up in an environment where you make money the old fashioned way, you earned it! What will be the impact on our business if the fast food protestors lobbying for a $15 minimum wage actually win?

Old School

I remember starting off in the manufacturing industry earning the impressive minimum wage of exactly $2.10 per hour in a manual entry-level position. My path to earning more money was clearly laid out to me; I had to work hard, gain experience, and master my job. If I wanted to advance more rapidly I had the opportunity to learn other jobs in the shop, often on my own time and after I had completed my own workload for the day. “Back in the day”, there was no sense of entitlement, period; you started at the bottom, worked hard, and moved up in the company. The more skilled you became, the more value to the company you brought and the more money you made. The more skilled the workforce became, the more value the company brought to their customers, and the business grew. This is the basis of our free market system.

107% Raise

When was the last time you received a 107% wage increase? Does never come to mind? That is the result of increasing the minimum wage from $7.25 to $15.00 per hour for entry-level workers. Companies, and particularly the fast food industry, rely heavily on unskilled job seekers to fill entry-level positions in their restaurants and devote great time and expense in training them to become highly-skilled members of the organization. Once the minimum wage is raised, will these workers magically become more skilled, efficient or valuable? Of course not. What are the benefits companies will see from this increase in expenses? None. What this will do is negatively impact the organization’s labor expense, profitability and competitiveness. Flipping the fry basket was never intended to be a family sustaining job.

The $8 Hamburger

Would consumers pay $8 for a Big Mac to support the increase in minimum wage? Most assuredly no, but what would likely happen is fast food owners would invest in robots and automation to flip frys, pour drinks and even build burgers. Robots don’t take breaks, care about diversity, demand wage increases or join unions. They just work. What the protestors don’t realize is that what they are demanding will price their jobs right out of the market.

Collateral Damage

Artificially inflating the minimum wage diminishes the incentive for new workers entering the workforce to want to work hard, learn more, and move up the ladder and will actually have the reverse effect; disincentivizing new workers. Raising the minimum wage is touted as a tool to reduce poverty, but it does not. Instead it encourages teenagers to drop out of high school and reduces low-income workers’ future job prospects and earnings.

We already have somewhat of an entitlement problem in this county with inexperienced workers expecting to land high paying jobs right out of the gate. Couple this with our current struggle to remain competitive, or even relative, in the global environment, and it becomes clear that nothing good can come of this.