The pursuit of a “livable” wage for entry level workers has been a topic of hot debate in this country.
Raising the minimum wage to $15 an hour distorts the mechanizations of the free enterprise system based on supply and demand.
Let’s say an eatery is forced to pay all its employees a minimum of $15 an hour, the owner passes the cost on to the consumer.
A hamburger, fries and soft drink that may have cost $7 now costs $13. You decide you don’t want to pay that much, so you stop ordering.
Business plummets. The owner is forced to lay off or cut the hours of his $15-an-hour workers.
And that’s how the free-enterprise system works.
As a small-business owner I have had to cut back on hiring entry-level and marginal employees, so I see it firsthand.
An employer has to believe the value created by his employee is GREATER than his cost, a major reason why minimum wage laws create unemployment.
And who is hurt by rising prices? The same lower-wage worker the minimum wage is trying to help.
When San Diego raised its minimum wage to $11.25 an hour, 4,000 restaurant workers lost their jobs or the jobs were not created. That’s just one city.
Seattle decided workers should get $15 an hour, so in 2014 passed it into law. It has been charting the pros and cons in stages.
The results of the first wage hike from $9.47 to $11 an hour showed the effects were small.
In a second study released by the University of Washington covered the increase from $11 to $13 an hour. The effects were huge.
For every 1 percent increase in their hourly wage, workers saw a 3 percent reduction in hours.
That means on average they lost about $125 in earnings a month.
Researchers discovered that a $1 increase in the minimum wage leads to a 4 to 10 percent increase in the likelihood of any given restaurant to go under.
Economists have found minimum wage hikes to be unhelpful in reducing inequality and is often followed by more low-income workers being laid off.
Feel-good legislation always sounds equitable and righteous … until reality hits in the form of the laws of economics.
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