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Raising Minimum Wage Will Only Increase Unemployment and Prices

The unintended consequences of government meddling are nowhere more apparent than the minimum wage. Minimum wage increases have historically led to unemployment and even helped trigger recessions. It’s basic economics, really. When the government makes an employer pay its employees more without any new income, something has to give.

Fast-food restaurants are already introducing pay stations where customers place their orders and wait for their food, thus eliminating cashiers. Assembling burgers costs an estimated $9 billion a year in labor costs, according to Momentum Machines. They have a solution to the rising cost of burger-flippers. It’s a burger-making machine that can churn out 400 burgers per hour. Not only does it almost totally eliminate the labor involved in burger cooking and assembly, it takes up far less space. So imagine the burger joint of the future, where you place your order electronically and only two people are needed in the restaurant: one to continually feed the machine and one to bring your order to the counter.

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I bet this ain’t what those malcontents with the signs demanding $15 per hour had in mind.

Now the hospital industry in New York is raising a red flag to a proposed mandatory $15-per-hour minimum wage. They say it will have a devastating effect on their industry, adding an estimated $570 million to their costs. At the very least, businesses will either have to increase prices, hire fewer workers, or even fire some existing workers. Some businesses could close their doors altogether.

This is something proponents of mandatory minimum wages fail to take into consideration. You think healthcare costs are high now; wait until the minimum wage is doubled. These proponents of government meddling say that no one can live on the minimum wage. No one was ever intended to. The minimum wage was designed to be just that, a bare minimum wage for the least-skilled labor. Think teenagers in their first jobs. They have little or no skills to offer. It’s how most of us started in the work world.

They also claim the minimum wage hasn’t kept up with inflation. The truth is it’s the other way around. The minimum wage started out in 1938 at 25 cents per hour. Adjusted for inflation, the minimum wage today should be $4.20 per hour. Instead, it’s $7.25. There is no argument whatsoever for raising the minimum wage. In fact, what companies pay their employees is none of the government’s business.

Eliminating the minimum wage horrifies many. They believe people would be destitute without it, yet only a relative few actually earn it. According to the Bureau of Labor Statistics, only 4 percent of hourly employees are paid the minimum wage. Furthermore, 58.7 of all workers are paid by the hour, so that 4 percent is 4 percent of less than 60 percent of the workers.

In other words, hardly anyone makes the minimum wage. What happens when the government mandates employers double it? Not only do you have to raise the minimum wage, but every other hourly wage to boot. If you’re making $15 an hour now, you’re going to be hopping mad if you’re paid the same as entry-level employees, so your pay will have to increase. You’ll bump up against the guy or gal-making $20 per hour and on up the chain it goes.

Now you see why force-feeding a minimum-wage increase on American companies is a bad idea, especially one that doubles the minimum wage. Instead, we need to encourage workers to develop the skills where they’ll never make minimum wage.

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About the Author

Phil Valentine is an author and nationally syndicated radio talk show host with Westwood One. For more of his commentary and articles, visit philvalentine.com.

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