A Case for Abolishing the Minimum Wage
The first federal minimum wage was introduced in 1938, and since then the amount has been raised about twenty-two times with the most recent update in 2009 when the minimum wage was raised to $7.25 an hour. Although the minimum wage has remained unchanged since 2009, some states have increased their minimum wage, and this has increased pressure for the government to increase the federal minimum wage. The idea of raising the minimum wage is noble and will help to increase the purchasing power of the low-level income workers. However, the concept of a minimum wage has economic ramifications that adversely affect the same workers it is supposed to protect.
A study recently conducted to determine the effects of increasing the federal minimum wage from $7.25 to $12, $10 or $15 by the Congressional Budget Office, titled “The Effects of Employment and Family Income of Increasing the Federal Minimum Wage” concluded that although raising the minimum wage would increase the earnings of the low-wage workers, it would also lead to massive job losses in the same wage class (Kelly, 2019). Employers, especially small businesses and local businesses that depend on thin profit margins, will be the most affected by the increase in minimum wages as they would be forced to increase the prices of goods and services. The increase in rates may force clients to seek services from other businesses, and the loss of customers will eventually result in a loss of income, thus forcing the businesses to lay off workers. Without the requirement to pay employees a certain minimum wage, these businesses can continue to thrive and the employees can get to keep their jobs.
Furthermore, most of the service-sector businesses operate on thin margins and increasing the minimum wage could put the companies out of business. Some of the biggest companies in the service-sector industry have already begun laying off workers and replacing them with machines to reduce their operating costs. For example, Mac Donald’s, which is one of the biggest fast-food companies, has introduced self-serve kiosks in their outlets, thus replacing much of their human workforce (Kelly, 2019). Other brands such as Target and Home Depot have also introduced self-checkout systems. The reality is that companies are in the business of making money, and reducing their cost of operation is vital in increasing profit margins. Therefore, a minimum wage bill that is expected to increase to about $15 an hour by 2025, will force these companies to reduce their staff or automate most of their operations, eventually hurting the same people the government is trying to aid by forcing companies to pay a set minimum wage.
The minimum wage concept is a commendable and noble idea, but it is vital to consider the adverse economic consequences of forcing businesses to comply with these measures. An increase in the minimum wage will lead to job losses as companies and small businesses adapt to the changes. Increasing the minimum wage directly affects the operation costs of businesses, and most companies will react by automating their services and laying-off workers to reduce their cost of operation.
Reference
Kelly, J. (2019, July 10). The Unintended Consequences Of Raising Minimum Wage To $15. Retrieved September 30, 2019, from https://www.forbes.com/sites/jackkelly/2019/07/10/the-unintended-consequences-of-the-15-minimum-wage/#6223940de4a7.