Excuse me, do you have time to talk about wages?
Minimum Wage Laws and Employer Incentives
"You don't care about the poor!"
Yes, someone has said those words to me, all because I stood against the fightforfifteen movement to increase the federal minimum wage laws here in the US to $15/per hour. How could I stand against poor people making more money? Who does that?
One of the main reasons deals with incentives placed on employers and the beyond-stage-one implications they can have on the very people that minimum wage laws claim to help. Diving right in:
Let's look at McDonald's in Europe as one real-life example of high minimum wage laws and their impact on labor option incentives for employers. First, please read this article. Second, we'll take a look at some of the highest minimum wages in Europe (converted to approx USD--rounded to the nearest whole cent--for context):
- UK approx $9.41/hr (38 hr work week)
- France approx $10.61/hr (35 hr work week)
- Ireland $10.25/hr
- Belgium it's $10.01/hr (38 hr work week)
- Luxembourg it's $12.43/hr
- Netherlands it's $10.37/hr
- Germany $9.53/hr
all assuming a $1.12 USD/EURO exchange rate as of 08/15/2016.
These seven nations are home to more than half (57%) of all McDonald's locations in the Eurozone. There is obviously a huge incentive for McDonald's to replace some of their staff in these countries with self-checkout style kiosks to keep the cost of labor down. These people who were once perfectly capable of taking an order, greeting a customer with a smile, giving change, and providing a customer with a lasting impression. Now, these low-skilled, otherwise competent individuals will be without a job. At a particular price point, the cost of buying and maintaining a machine becomes cheaper than buying and maintaining a flesh-and-bone employee.
The article from my second paragraph linked above is only five years old. By the end of 2016, McDonald's plans to have kiosks in over 1,000 locations in the US. We are simply substituting low wages for unemployment as the economist Henry Hazlitt might say.
McDonald's has attempted some damage control, stating that the logic behind this move is more consumer-driven than employee wage driven. But, let's be honest here, its getting more and more expensive to hire low-skilled workers. Last year, the popular fact-checking site snopes.com claimed that McDonald's is not reacting to calls for a $15 minimum wage with the installation of kiosks at locations across the globe. Yes, its easy to see that the transition to kiosks is not a gut reaction to scares of a $15 hourly labor price floor as the first article linked here is dated 2011. This has been going on for longer than the fightforfifteen effort has been around. But it doesn't take a rocket scientist to see that passionate calls for minimum wage increases wouldn't be too far off. Additionally, I highly doubt McDonald's is going to openly admit they're trying to reduce the skyrocketing cost of low-skilled labor. Your PR team would much rather find innovative ways to boost customer service.
I'm afraid that if we keep raising minimum wage, other employers like McDonald's will be forced to find alternative "employees" in the US. It's only a matter of time. If you really care about the poor and low-skilled/experienced, say no to federal minimum wage increases.
A great introduction to the indirect consequences of minimum wage laws can be seen here:
Works (all websites below accessed 08/15/2016):
Great post. Something that is rarely discussed is the chain reaction effect caused by raising minimum wage, inflation. The wage of everyone goes up and prices of goods can go up making goods more expensive or prices stay the same and staff reductions and benefit cuts have to be made to account for the new minimum wage.
Another correlation others don't see is that there are more lower wage jobs as the US has shifted from a manufacturing/production based economy to a service based economy.
Many years ago McDonald's was hiring at $10/hr to start almost double the $5.15 minimum wage. Unemployment was low, Worker participation was up and business was booming. The same McDonald's today hires at minimum wage $7.25/hr and they have plenty of applicants. Competition isn't only good for the consumer, it's good for employees as well.
What we need are more jobs. More middle income paying jobs. The problem is that every year it seems like the government passes more and more taxes, licensing, & regulations compliance laws. The cost of doing business in the US is getting more and more expensive and difficult.
Who really pays taxes in the end? It isn't the corporations & businesses. It all gets added into their bottom line and passed onto consumers and employees. And while taxes, licensing fees, and compliance costs go up we are paying for it. There's less competition, less companies, less jobs.