After scrolling through some news headlines today, I noted that there was another "Fight for $15" rally that was planned for today. It's been quite a while since we've heard these fateful words. I don't know that I've heard of any of these rally's since November to be completely honest, but in any case, they are back, even if they are on a reduced form. The fight for $15 has roots in an honorable cause, but in reality, it's a movement designed to please big business donors before completely wrecking the economy. Let's look at the minimum wage, and why such a drastic increase would be detrimental, if not dangerous while we are so early in our recovery.
Most people fighting on for a fifteen dollar minimum wage will tell you that we've been in a major recovery since about 2010. While it is true that we experienced a period of economic growth during the last seven years, by the numbers our economy has actually been quite stagnant since the "Great Recession". There were a few quarters that surged over 3% here and there, but overall the total economic growth under the Obama Administration was around 1.4%. His best year in that was 2015 at 2.9%. So why is that important? The growth of GDP versus the growth of dollars circulating in the economy is the definition of inflation, and while the Federal Reserve continued to print dollar bills at an accelerated rate, the value of each of them dropped.
An interesting discussion came about one day at work when a rather outspoken employee started mouthing off an A&W employee getting his sandwich wrong, expressing that "this idiot wants 15 bucks and hour!" This caught the ear of the inventory controller, who doesn't make even that much, and he, in turn, started yelling back about how he doesn't make that much. The night service adviser quelled the situation, steering the discussion away from "who should make what" into "why is the dollar so worthless that we feel the need to double the federal minimum wage." It's a point worth noting. The minimum wage is essentially just an arbitrary number, with loose ties to the inflation level and the Gross Domestic Product. It's also a very low baseline. Currently, only two States in the Union have a State Minimum Wage lower than the federal one, in addition to the five states that don't have any minimum wage at all aside from the Federal one. There are also 14 states that currently use the Federal Minimum Wage, so the $7.25 only applies to 21 states. Furthermore, this statistic only applies to 2.7% of workers nationwide, or a grand total of 2.2 million people as of 2016, with that number dropping off all the time. With numbers like that, the bare minimum of the minimum wage affects a very niche group of people. However, we are still in the earliest stages of economic recovery, and that is still quite a large number of people to have these kinds of jobs. The other driver is the demographic that sits in the rather large swath of people that have jobs that sit between the minimum wage and the golden number that has been set as a goal of how to make the entire country rich at once. Large groups in the movement are the people who are making 10 or 12 bucks and hour. The unfortunate myth with them is that the majority of them would get moved to $15, and probably not more until they earn it, increasing the number of "minimum wage" jobs through the ceiling, and precipitating a further level of unrest while the workers who were above minimum wage demand a higher wage yet.
So what does an increase of over 100% in the minimum wage mean for jobs on the whole? Well, in the beginning, the vast majority of US workers would be entirely unaffected. Most people fall above this threshold, or are close enough to it that it will be just a mild pay raise. The immediate concern would be with the fast food, grocery, foodservice, retail, and CNA fields. While the medical industry will find a way to accommodate it's employees, there will definitely be cutbacks and layoffs. The retail and food industries, on the other hand, will see drastic cutbacks, and automation will cease to be a meme and become a reality. As time progresses, though, many to all of the smaller stores and restaurants will start to go under, paving the way for IHOP and Denny's and other big corporate businesses to take over. The next immediate concern would be pricing. If the minimum benchmark for an hour's labor doubles, the cost of production will go up. I don't believe costs will double, as material cost increasing will be a secondary effect, and many manufacturers are closer to the fifteen dollar an hour benchmark, but there will be increases. States will also mandate higher state minimum wages to remain competitive for laborers. As time goes on, production costs will continue to increase, as manufacturers increase wages to attempt to retain workers dissatisfied with suddenly being relegated to minimum wage status. Costs will go up, and wages will slowly rise to match, and then in a couple of years, after the federal reserve has printed money to supply the economy, we will be having this argument again. $15 will no longer be a living wage, and then we will have the fight for $30 on our hands.
A dramatic increase in the Federal minimum wage will have drastic effects. As I mentioned earlier the first problem will be that it will starve out all the small employers, leaving the giant corporations to take over. The layoffs will leave more people living on entitlements, and our economy will go right back into the tank. Over a few years, the economy will come back around, and as inflation equalizes, and small businesses will begin to rise again as the American Entrepreneurial spirit takes over. But the reality is that as the currency increases, it continues to be devalued until we have a currency as worthless as Venezuela.
A minimum wage is an arbitrary number that represents the value of the lowest level of work. Unless you are in a full Communist economy, no matter how high you raise it, the economy will adjust to match it. The minimum wage is just that: A minimum. If you want to have a higher wage, get a better job. Trust me, if you work hard at what you do, the employers will start fighting over you, and you'll see the wages to match.
I have one final thought on this. Over the last 10 months, it seems that there has been very little on the fight for $15 front. It's a little hard to explain from November to...let's say April, but after that, our economy has been booming. The reeling back of regulations has allowed the creation of over a million jobs to date, and I'd lay a bet that the majority land between $12 and $20 per hour. When many of the "Fight for $15" movement go back to their regular jobs, what's left are the people that the jobs were intended for: Young people starting out with few to no bills. If you're still in the minimum wage group, hang in there for a little while. Take some time, and look outside of your job market, too. I thought I was stuck in my $12 an hour part time job, but I got up and moved one day, and I suddenly found myself constantly with offers on the table for employment even before the recovery.
As always, leave your comments below, and you can share, with my permission, all across social media. Get a discussion going and see what's best for you and yours. We can start fights and get nowhere on the issues, or we can discuss them and find the best solution for everyone.
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