A higher minimum wage will cause more people to lose their jobs.
In an article for Forbes, Tim Worstall from the Foundation for Economic Education explained how a rising minimum wage will lead to fewer labor opportunities and more job loss. Meaning, those who demand a raise in the minimum wage, such as the Fight For 15 movement, may be inadvertently advocating for people to lose their jobs.
“We people who know our economics keep insisting that raising the minimum wage will lead to people employing less labour . . . the other name for people using less labour is that we will lose jobs, there will be unemployment,” writes Worstall.
The two real-life cases Worstall detailed were Target and Wendy’s, two corporations that have been forced to make adapt in response to inflated wages.
The Forbes piece cited that Wendy’s underwent a wage inflation of five percent and will likely see another four percent increase in 2017 — which has already resulted in the slashing of 31 labor hours per week in each location.
One way Wendy’s is combating these rising labor costs is by adding computer-run kiosks. These automated machines allow customers to order their food from a computer, while also requiring no human employee to run consistently. By the end of year, the fast food chain hopes to place kiosks in 16 percent of restaurant locations.
Worstall lists the likely responses companies have in reaction to the rising minimum wage: “One is to cut the profit margin. Wendy’s seems to make about 8% on sales as net margin. Not a lot of room there to cut that.”
“Another possible move is to increase prices, or perhaps not be quite as cheap as everyone else,” he adds.
However, Worstall noted that in the case of Target, raising the price of products was not the most beneficial route for a company. Target will be cutting its prices this year. The Chicago Tribune reported that the retailer’s fourth-quarter reports “showed weak store sales and tumbling profits.”
The Forbes article suggests that, in today’s marketplace, customers simply are not willing to dish out more than they have to when it comes to buying products, which leaves retailers with one option: cut costs by cutting labor, and subsequently, employing fewer workers.
“As I’ve been saying all along here a rise in the minimum wage is going to mean a fall in the demand for labour, to mean unemployment for some unfortunates,” concluded Worstall.
According to Heritage Foundation research fellow Salim Furth, another downside to rising minimum wages is job seekers struggling to find work. In fact, the expert believes that a high minimum wage is less to blame for people being laid off and more to blame for those who cannot find a job.
In an interview with Red Alert Politics, Furth stated, “raising minimum wages affects job seekers more than jobholders . . you see slower hiring, the kind of worker who has no experience who a company could take a risk on at $7.25 won’t get a job at $9 an hour.”
“The first thing you see is changes in who they hire, the second thing is higher prices and the third thing you see is shops closing, because at higher prices people buy fewer products,” added Furth.
With “living wage” advocacy groups like Fight For 15 receiving large amounts of support, as well as rising minimum wages in New York, California, Portland and Chicago, it is likely that this issue will be a growing point of debate for years to come.
