Stop raising the minimum wage

Luay Rahil

The City of West Hollywood now has the nation's highest minimum hourly wage rate after the city council approved to raise the minimum wage to $17.60 per hour.

I don't agree with this vote, but I believe these decisions are better considered at the local level and not the federal level.

This is a bold and polarizing move, and it is also a horrible economic move. Minimum wage jobs were meant to be entry-level jobs, not permanent jobs. Few employees might welcome this, but the entire city will pay for it because it will slow economic growth and damage the city's ability to attract businesses.

Nya Marshall owns a restaurant in Detroit, and the idea of raising the minimum wage stresses her out because it will increase her labor cost and forces her to close her restaurants, already struggling from COVID-19 restrictions. But, on the other hand, her employees would love the idea of raising the minimum wage because it offers them more spending money.

Between Nya Marshall's concerns, and her employees excitement lays one of the biggest debate in politics and economics, should government regulate and raise minimum wage?

Raising the minimum wage could force small businesses to lay off employees and increase the unemployment rate. For example, if you own a small restaurant with an average ticket of $10, how can you pay someone $17.60 per hour to drop French fries in the fryer?

When you force businesses to raise their minimum wage, a few things might happen,

  1. Businesses will increase prices so they can stay profitable.
  2. Automate their services because it is cheaper.
  3. Outsource most of their services to a different country, so if you visit Wendy's drive-through, you might be talking to someone in a foreign country.
  4. Teenagers might be shut out of the workforce.
  5. Raising the minimum wage will increase products prices harming the poorest areas in the country.
"There are no solutions, only trade‐​offs." Thomas Sowell

The Congressional Budget Office predicts that 1.4 million fewer workers will be employed small businesses are forced to raise the minimum wage. The government needs to let the free market decide on how and what to pay its employees.

Employees get paid based on their productivity and the value they bring to the marketplace. So if employees want to make more money, they have two choices, improve their skillset and increase the value they bring to the market, or find another job. I have done both in my life, improved my skills, moved jobs, and doubled my income.

The minimum wage jobs were designed to help teenagers and young adults enter the workforce and not earn enough money to start a family. The Federal government should control inflation and interest rates to ensure that employees' salaries maintain their purchasing power. So, if the federal government thinks that the purchasing power of the minimum age is not sufficient, they need to control inflation.

I understand that some people are unable to improve their skill set or get a new job, so the Federal government needs to design programs to help them and not force private businesses to increase their minimum wage.

As I mentioned above, these decisions should not be considered by our elected officials. However, if politicians insist, we should leave it to our local officials. Ryan Bourne agrees with me, "A crude, blanket high minimum wage across the whole country is therefore incredibly risky."

As Michael Strain suggests, "No matter what you think about the recent literature on the minimum wage, all economic theories imply that minimum wages should be decided at the state and local level, given the economic heterogeneity of the United States.  That is the message that you as an economist should be carrying forward."

Forcing every business to raise the minimum wage is an unethical decision because it taxes small companies. The Small Business Administration states that "Small businesses create 1.6 million new jobs annually and are responsible for 60.6 million jobs across the US, which accounts for 47.1% of the total US workforce."

Big businesses like Amazon have access to great connections in Washington. As a result, they will increase the minimum wage while getting insane tax cuts at the federal and state levels. So, raising the minimum wage will help them because most small businesses will be out of business, increasing their market shares.

CBS News reported last month that Amazon had secured $670 million in state and local government tax breaks in 2021. Unfortunately, these kinds of breaks are not available for small businesses. Please check this site if you are interested in all the subsidies Amazon received from state and local authorities.

I think every business should pay employees what they deserve. I just don't think it is the government's job to set that rate.

Comments / 345

Published by

Writing on business, culture, leadership, and social issues.

Fort Worth, TX

More from Luay Rahil

Comments / 0