The “Fight for 15” movement has become popular in the past year, gaining advocates for a $15 minimum wage from politicians and the working class alike. Protestors against the United States’ current federal minimum wage of $7.25 an hour argue that this is not a “living wage.” Although I empathize with people living in poverty, raising the minimum wage would have the opposite effect intended. Instead of helping people climb out of poverty, a dramatic increase in minimum wage would eventually price low-skilled workers out of jobs.
One does not need to be an economist to understand that increasing the cost of labor increases the cost of goods. Businesses, often small ones, operate off of low profit margins and high sales. As these businesses raise their workers’ wages, they must raise the prices of their products. As the prices of products rise, sales go down. As sales go down, businesses suffer, not to mention that most minimum wage jobs have a low skill requirement. When an employer does not need to hire someone based off a complex skill set, they begin to replace jobs with technology. It is not hard to imagine that if McDonald’s workers were paid $15, the company would begin to phase out employees and replace cashiers with iPads.
Many jobs are paid based on the amount of goods or services produced. When an individual can produce more for the economy, he or she gets paid more. When a fast food service worker who doesn’t contribute new goods or products to the economy gets paid the same amount as an EMT who saves lives, competition in the job market goes down. If the minimum wage were to rise dramatically, not all professions across the board would see a proportionate increase in salary. It would not be sustainable for the economy long-term. Unskilled workers become “priced out” of their jobs, increasing unemployment rates.
If this is difficult to believe, look at the unemployment data for the European Union, which compares countries with minimum wage laws and without minimum wage laws.
In 2012, countries with minimum wage laws had an average unemployment rate of 11.8 percent, where countries without these laws had a lower unemployment rate of 7.9 percent. The trend over the past decade has remained consistent — higher minimum wages enforced by law turn out higher unemployment rates.
This has even been seen in United States history — the last time there was no minimum wage law was during the Coolidge Administration. During the last four years of his presidency, the unemployment rate dipped to an historic 1.8 percent.
It is dangerous to think that politicians, vying for power via the public vote, are doing good by voting to raise the minimum wage. When their careers depend on appealing to the emotions of the public, they tend to push aside what is best for the economy and the people to procure a vote. The facts and data are there. A dramatic hike in wages will only damage the economy and cost the people.
If we really want to help the poor, is removing jobs from the market the best way to do it?
Collegian Columnist Megan Burnett can be reached at email@example.com or on Twitter @megsbcollegian.