Economy and Business U.S.

Raising the Minimum Wage is a Road to Hell

New York City is currently experiencing its worst decline in restaurant jobs since 9/11. Over 75 percent of New York City restaurants were forced to reduce employee hours, and 36 percent had to cut staff in the wake of the recent minimum wage increase to $15/hr. Since going into effect at the end of last year, many businesses have already closed forever, and others have raised their prices in response.

The fallout from the City’s minimum wage hike is not surprising. The road to hell is paved with good intentions. Such ominous language is fully applicable to one of government’s latest attempts to do good: raising the minimum wage. Senator Bernie Sanders and over 20 other Senators once introduced a bill to raise the federal minimum wage to $15 per hour. While this bill had no future, several cities and states are raising or have raised their minimum wages to that threshold so coveted by progressives, including New York City, Seattle, Los Angeles and eventually the entire state of California.

Hiking the minimum wage has been long touted as a way to help the poor. Senator Sanders has pined that anyone working full-time deserves a living wage. $15 per hour is seen as a road to prosperity for those on the bottom rungs of the socioeconomic ladder. However, it is anything but. Setting such a steep base salary is nothing short of a road to hell. The minimum wage is zero for workers who lose their jobs because their employers are either unable or unwilling to incur the extra costs of employment. The minimum wage is zero for job seekers priced out of the job market because businesses cannot afford to employ them. This is hell for America’s youth, who are just trying to gain job experience to make themselves more marketable when applying for internships or better jobs. This is hell for the poor; they cannot better their situation because they become too expensive to hire. No entry level position means no chance of promotion to a better job with better pay. They are stuck where they are, forced to depend on government handouts to survive, their American Dream wrecked by government’s attempt to help.

A $15 per hour minimum wage is also hell for small business owners. Most only employ less than a hundred people. These business owners are faced with three choices in the face of mandated wage increases: they can suffer a decrease in profit, they can increase prices, passing off the extra costs to the consumer, or they can cut their staff. Larger businesses can pass off the costs by raising their prices by a small percentage on a large number of goods – Walmart and Home Depot can easily absorb wage hikes by doing just that. The local pizzeria and bookstore only have so many items they can raise the price on, so those price increases will be higher, making them less competitive against larger businesses. Mom-and-Pop shops cannot raise the prices on their goods without driving customers away, which could drive them out of business. Their only other option is to let workers go. Many small business owners become close to their employees, so this action would be especially heart-wrenching. Some businesses may not be able to operate without a certain number of staff, so they will have to close. Yes, raising the minimum wage literally threatens the livelihood of small business owners, especially in rural areas. Mega-rich Beverly Hills is going to be impacted a lot less, if at all, compared to modest-income Bishop, several hundred miles east in the Sierra Nevada. Bishop’s wealth is mostly generated from small businesses, so the city would likely be decimated by such a high minimum wage, as businesses will have to raise prices and/or lay people off or even shut down. This hell is the reality many rural communities face.

Even New York City is feeling the Bern. Restaurant employees whose wages became $0 after their jobs were eliminated are now facing the hell of paying bills while finding a new job. If New York City cannot cope with a $15 minimum wage, how can rural areas, many of whose inhabitants’ incomes are lower than more populated areas, be expected to do so? Some higher-income areas are better able to adjust to the mandatory raise, but many small, family-owned businesses will be wiped out in other areas when the wage hike goes statewide. New Jersey will be facing the same hell when its $15 minimum wage law goes into effect.

Even McDonald’s is not immune. The fast food giant is rolling out kiosks at all locations by 2020. It will be hell for the cashiers who will be replaced and out of a job. It is not outlandish to say that other fast food joints and sit-down restaurants will not eventually follow suite; some like Chili’s are already experimenting. This will result in thousands of unemployed youth and folks just trying to make some money while waiting for their careers to kick off, and it will be a very deep, dark hell for them.

The steep wage increase also prevents new businesses from opening. Potential entrepreneurs will conclude that the increased labor costs make starting a business too risky. This abortion of businesses carries reals costs to the economy; companies that never existed never employed anyone, meaning entry-level jobs that might set impoverished youth on a successful career path were never available.   

The poor would fare better if burdensome licensing requirements and other barriers to entry were eliminated. Deregulation also gives businesses large and small more hiring opportunities, so more people could be employed. School choice can create better educational opportunities, which in turn yields better career prospects. All these solutions involve government getting out of the way, while increasing the minimum wage is a tactic of direct government interference in the economy.

Ronald Reagan once remarked, “The nine most terrifying words in the English language are: I’m from the government and I’m here to help.” Raising the minimum wage is government’s latest attempt to help the poor. However, this “help” is a terrifying road to hell, for workers priced out of a job and for small businesses whose very existence is directly endangered, a road already traversed by New York City.

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One comment

  1. Where I live, this is a disease. Zoning keeps many lower income people from ownership. I look forward to bring this up with the zoning board/city council.

    “The poor would fare better if burdensome licensing requirements and other barriers to entry were eliminated. Deregulation also gives businesses large and small more hiring opportunities, so more people could be employed”.

    Like

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