The Minimum Wage Debate – $15/hr Nationwide Rate

This is an article I have been piecing together for almost 5 years now, that I’m finally deciding to publish here today on account of Joe Biden’s recently delared initiative to raise the nationwide minimum wage to $15/hr. In the spirit of being fully transparent, I think this decision would be a tremendous mistake. With that said however I know my personal opinion means jack $hit anyways, but here’s why I believe this.

To set this up, all political ideology aside for a moment, it’s a statistical fact that wages have not kept up with the cost of inflation and the average American makes less today comparably to what the average American used to make in the 1960’s and 1970’s. Inflation has also skyrocketed inside the United States ever since Barack Obama’s stimulus package of 2009, resulting in stock markets continuing to set new all time records seemingly each passing month since 2014. Again, this is not a sign of economic success like Obama and even Trump have each attempted to claim. Rather, it is a reflection of trillions of dollars being introduced in the the marketplace as a result of the 2009 financial crisis. The Wall Street dollar amounts are representative of textbook inflation, not prosperity or economic growth.

With this established, theoretically, it make sense why a minimum wage hike makes a lot of sense for modern America, because everyone is now going to need more money than they used to in order to maintain the same quality of life as they used to headed into the future. Spoiler alert, monetary inflation values have no signs of slowing down and are only going to keep soaring in the immediate future, especially if Biden is successful in passing even more economic stimulus packages in 2021 – making this problem entirely worse.

Generally speaking, as far as the minimum wage debate, on one hand liberals contend that wage increases are necessary to help each individual in society live a better quality of life. On the other hand, conservatives warn of the increased strain/burden that increased wages will put on the businesses which provide people with money/paychecks in the first place. While these are the two prevailing trains of thought on this issue, it’s my article so I want to take the time point out a couple fallacies in this particular economic wage debate, as well as address a few other issues while I’m on the subject.

Some contend that raising the minimum wage would immediately put more money into the pocket of low-wage workers, who would then spend the money on things like housing, food, gas and luxuries. There are also far more wage earners in the United States than there are millionaires, and wage earners are much more likely to spend their money than keep it in a bank like their rich counter parts. Because of this, they argue the boost in the expenditure for goods and services as a result of wage hikes would only then help to stimulate the economy and help create new business markets emerge.

I don’t necessarily argue, but it’s a commonly held liberal belief that tax breaks to/for the rich will never work because the rich will simply just keep/hoard the money for themselves instead of equitably re-investing it back into society or the economy. As they then put forward, in order to expand the economy, we must put more money into the hands of the ‘common man,’ who is more apt to spend a higher percentage of their yearly earnings – thus benefiting the entire economy. But there is an entirely separate train of thought, which happens to be my own.

The way I see it, and I’ve been homeless before, by raising the minimum wage for everyone we would be stealing billions of dollars from employers without actually increasing the amount of money available to them within our closed economic system. This can only result in two things, an increase in the costs of goods and services charged by businesses and a decrease in the overall workforce. Though everyone would like to make more money, you have to realize how raising the minimum wage would effect the people giving money to the working class in the first place; businesses.

Simply put, raising minimum wages naturally increases the cost of running a business – it’s cause and effect. However, to cover this new expense businesses/employers will either have to lay off a certain number of employees or raise the costs of their products, because it would be the only two options available to maintain the same level of net profit they did before being mandated to increase wages to their employees. No one knows how many people would actually be laid off if a theoretical nationwide hike on the minimum wage went through to something like $10-15, but it could theoretically cost millions of jobs.

Furthermore, raising the minimum wage prices people out of the workforce. For example, the reason so many people don’t make more than minimum wage today is because they do not have the skill set, education or training to justify a higher salary. So, if the work force is cut and you are one of the previous minimum wage workers whom gets laid off, it’s now going to be exponentially harder for you to find any new job anywhere else. It’s just a fact, with more unemployment and higher wages comes more competition for any new available positions in that market. If you already did not have the skills, education and training before wage hikes went through then you run the risk of being priced out of the market entirely afterwards, perhaps forcing many families to move and uproot, or become more dependant on Federal assistance/entitlements – then requiring the Government to increase expenditure and demand more taxes, perpetuating the cycle. This problem is made worse for the Government given that they are earning taxes from fewer people in the workforce, thus cutting Federal revenue as well.

For example, in December 2019 the city of New York adopted a city-wide minimum wage of 15$/hr for all employees. At the time, NYC’s unemployment rate stood at approximately 4%

Within 11 months the cities unemployment rate rose over 300% to 12.1%, thousands of business closed permanently – all as a result of extremist liberal economic policies:

Raising the minimum wage further hurts businesses by increasing taxes upon that business. For example, some businesses are taxed according to payroll. Therefore, the more workers you have and the more you pay them, the higher your taxes will be. When we look at Medicaid and Social Security, both the employee and employer pay the same amount in taxes. If the minimum wage is increased from 10$ to 15$, employers are now paying 6.2% in taxes on 15$ than they were at 10$. So not only would wage hikes force businesses to pay more money to each individual employee, but it also forces them to pay more to the Government in taxes – a perhaps crippling double whammy that would cost/effect everyone in society.

Believe it or not, US businesses and corporations exclusively already operate under some of the highest tax burdens in the entire world. In a time of recession when entrepreneurship and small business ownership are significantly declining, we cannot continue to hamper peoples aspirations to be in business. In fact, it’s the duty of the government to do the exact opposite of this – at least in my opinion.

Playing this logic out a little further, Australia has a minimum wage much higher than here in the United States comparatively. In fact it’s $15 dollars and hour. It sounds nice – right? Why would anyone want to work in the US when you could earn more in Australia – right? Well, its not until you dig a little deeper into the economics of it all that you start understand the pitfalls of such a high wage. For example, if you go into a store and buy a bag of Doritos anywhere in Australia this will cost you somewhere around $4.50, and for a soda around $3. By comparison, you can buy that same bag here in the United States for $2.50 and that soda for $1.89. So, it’s not just as simple as raise the minimum wage and people will have more money for a better quality of life. The fact is, in a closed economic market, all the money being spent by businesses to cover a higher wages has to come from somewhere. This comes in an increase in the cost of goods and services to customers, like Doritos, and a decrease in the total nationwide workforce.