There’s been a lot of talk recently about an increase in wages. Right now, unemployment is at the lowest it has been since the recession (About 5.5%). However, income has remained the same. Some people believe that jobs do not pay well enough to expand the economy. A higher wage means people have more money in their pocket to spend, more incentive to work, and more ability to live comfortably. This is the theory anyway. Most economist believe that raising the minimum wage is actually bad economically speaking. All any business wants to do is make money, and if that means making cuts due to the increase of a minimum wage, then the business will do that. These cuts do not always mean a loss of a job, but often times the outcome of them is worse than earning $7.25/hr. Businesses can cut things like employee benefits such as healthcare and dental care. Writer Sean Williams explains why an increase in minimum wage will mathematically force businesses to close down.
He writes, “the Washington Restaurant Association recently estimated that Seattle’s restaurants budget about 36% of their expenses for labor, 30% for food costs, 30% for “other expenses,” with the final 4% being the rough profit margin. If restaurants were to do nothing in lieu of the coming $15 wage, Anton estimates that full-service restaurant labor costs would rise from 36% to 47% of their budget, while fast-food restaurant labor costs would shoot up to 42%. In other words, that 4% profit margin would turn into a negative 7% margin, meaning that restaurants would close and people would lose their jobs.”
With negative profits, it makes no economic sense for a business to stay open. As a minimum wage worker myself, the idea of a 100% raise sounds terrific! In the long run, however, an increase in the minimum wage would mean the loss of my job and many others.
Zach Robinson says
I like the topic of your article and the points that you discussed, happy that someone else realizes the negative affects of raising the minimum wage by $15 dollars.
kjk5563 says
Good topic, I think people forget about the negative sides of raising the minimum wage which would include many people losing jobs.