More and more government representatives are advocating raising minimum wage.
Would raising minimum wage to $12 and with mandatory sick time be “good”?
Talking about raising minimum wage might get you more votes, but really this is a political move and not an economic one.
All around it is an incredibly bad idea.
Why? Because historically, raising minimum wage has cost countless jobs, and caused countless business to become insolvent.
The jobs that disappear are the low-skilled jobs.
These are the jobs that keep the poor working afloat. They provide a place for young people to start at before they begin more lucrative careers.
Companies are forced to find alternative solutions to their employment problem. In some cases, employers move to a 100% part-time staff, allowing them to escape funding programs required of full time employee benefits.
Take for example the fast-food restaurant McDonald’s. They typically pay their employees either near or at minimum wage. What McDonald’s has done is increased its automation in response to rising minimum wage costs.
Machines cost less than people, and they can control thoise costs, as they are not beholden to government wage controls such as raising minimum wage.
They aren’t the only ones doing this; we are seeing this in other industries as well, which means there are literally fewer jobs available, especially at the entry level.
What happens then when a recession hits? It certainly means fewer jobs will be available.
But a free market for labor maximizes jobs.
With the minimum-wage proposal, it would also be likely to include tipped servers at fine-dining restaurants. This could possibly force them to be paid $12 minimum. This might result in restaurants deciding to eliminate tipping or have diners buy tickets.
This would gouge drastically at server’s incomes, and raising minimum wage would not be anough offset to compensate.
There needs to be a system where business owners have more freedom to set their own policies. Making a business owner offer paid sick time could force him to let more people go to be able to afford it. The money has to come from somewhere.
Sure the employer wants a healthier workforce, but he also wants to survive.
It is probably true that income inequality has become a problem here in America.
But there are better ways, like an expansion of the earned income tax credit, which helps ease the problem in a far more intelligent, sustainable, and fair way.
It’s not just about passing laws that help get a vote, but actual legislation that helps voters and winning in the free market.
The notion that simply raising minimum wage fixes anything is just about as short-sighted as any strategy could possibly be. Any student of economics 101 can show how it is a fictitious fix.
Sonia Rina Davies is a passionate entrepreneur, speaker, author, and personal development coach. She is an outspoken advocate of the free market economy and has helped countless clients identify their core values, envision and realize goals that resonate with those values. She oversees several businesses both online and offline.