By Robert J. Garrison
We must look at a couple of main objectives of being in business before we address the merits of the $15 minimum wage.
The first objective is to market a product or service that is either new or is superior to a product or service that is already being offered.
The second main objective of a business is to be successful. The way businesses gauge success is done by a couple of ways. First of course is profits. For a business to be successful they must make a profit. The bigger the profit, more the business is seen as successful. If the cost of wages go up, businesses will compensate that hike in wages by cutting hours of their employees to protect their bottom line. If a business can’t make a profit they won’t be able to hire more workers.
We all have been in a grocery store and seen those self check out lanes. Grocery stores put those in to cut back on workers because the cost the labor was not cost efficient for the store. In fact, in Seattle that also passed a $15 minimum wage, McDonald’s was forced to offset the cost of a higher wage by replacing their cashiers with automated screens where customers can type in their orders. The bigger the profits the more able it is to grow which brings me to my next point.
The second way that businesses gauge success is by growth. Growth can come from expansion by either building a bigger factory/shop or by opening more factories/shops, which leads to hiring more employees. If you force higher wages onto small businesses, they will not be able to contribute to job creation. Small businesses are a huge contributor to job creation in the US economy.
The main driving force of the U.S. economy is small businesses. Statistics from the Small Business Administration show that:
- The 28 million small businesses in America account for 54% of all U.S. sales.
- Small businesses provide 55% of all jobs and 66% of all net new jobs since the 1970s.
- The 600,000 plus franchised small businesses in the U.S. account for 40% of all retail sales and provide jobs for some 8 million people.
- The small business sector in America occupies 30-50% of all commercial space, an estimated 20-34 billion square feet.
Also according to the Bureau of Labor Statistics,
between the third quarter of 1992 and the third quarter of 2013, small firms (those with 99 or fewer employees) accounted for 41.8 percent of the net employment change.
So we must be cautious when creating policies that impact small businesses, since it would impact a major job creator and service provider in the United States. This is why the $15 minimum wage must not only be debated but more importantly, it must be researched to see what its impact would have on economic systems. Not only should the impact on economic systems be looked at but more importantly studies should be done to see what the impact would be on those that live within those systems.
While a $15 minimum wage sounds like a good idea we must look at the impact of that policy before enacting it. Yet as we know, companies always find a way to offset the cost of regulations imposed on them by the government. They do that either by raising the cost of their products or they cut back on their work force. There have been many good intentions and ideas by really smart people who practically just didn’t work or made things even worse than they already were.
How would this policy affect those living in the economic system? Since I work with the homeless and poor as a Chaplin at a homeless shelter in Washington D.C., I will focus on that demographic.
First there is a misunderstanding about people who are homeless. These people are not homeless because they are lazy or don’t want to work. Many of the homeless that I come into contact with strongly desire to get a job so they can move into their own place. However there are a few obstacles the homeless and poor deal with that proponents of the $15 minimum wage don’t seem to be thinking about.
The main obstacle is the lack of affordable housing. The gentrification that is going on in Washington D.C. and other major urban areas is causing the prices of living spaces to rise. There are government programs in place that will help those that need the financial assistance to get into their own place, through housing vouchers. These vouchers are based on their income which means the more they make the less they get to help with housing. So yeah, they make more money if the minimum wage is higher but that might be offset by the government cutting financial assistance.
Another issue is that these people not only receive financial assistance from the government for housing but they also receive food stamps and medical assistance. These things are also based on the income of the person. So if they make more they might lose some or all of that assistance. This would also cut into the supposed extra money that they would gain by a higher minimum wage.
Usually every quarter one has to provide records of their income so their benefits could be adjusted more or less. I remember one instance when my mom and dad where on food stamps. There was one-quarter where my dad made an extra $30 because he had to stay at work due to his relief coming in late. Due to earning that extra $30 for that quarter, which equates to $10 per month, our benefits were cut by more than $125!
These are the issues that people who live below the poverty line have to deal with. If they have to choose to work at a job that pays a high minimum wage, it could cost them their housing voucher, medical, or food assistance they receive. If that happens, the extra income they would make at a job that is paying a high minimum wage would all but be erased and some might even find themselves going into the hole. If I had to choose between losing those things or working at a job that pays me a high minimum wage, guess what I’m not going to go look for a job, nor will I try very hard to find one. So these programs are there to give a hand up to those in need who find themselves trapped in these programs. This lack of foresight about the consequences of a higher minimum wage is my biggest concern about the $15 minimum wage.
Sometimes government has good intentions which we see here with the $15 minimum wage. However, government almost never seems to think about the consequences of those good intentions. If a city wants to raise the minimum wage, it must think about all of the consequences of that policy. Having a higher wage does not always equate to one having more discretionary income to spend as I have shown above. If a city wants to enact a high minimum wage it must also change other government policies that the homeless and poor rely on to get by from day-to-day. Raising the minimum wage is not the end of an economic debate but a beginning of the process which I believe must be worked out before a higher minimum wage is even passed.
Robert J. Garrison is a political and religious writer for The Systems Scientist
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