Astute Finances
  • Blog
  • Register for a free gift card!
  • Store
  • Sites We Like!
  • Weekly Poll

How a $15 Minimum Wage Will Cause Maximum Damage

5/22/2015

1 Comment

 
Picture
There has been a lot in the news lately about the minimum wage being raised to $15 in many cities across the nation. In addition to Seattle, cities like Los Angeles and San Francisco have also taken the plunge.  There are viewpoints out there that say absolutely nothing bad will happen and there are those that state these increases will cause food costs at McDonalds and others to soar. I am here to tell you that both are wrong!  If nothing bad was going to happen, the minimum wage would have been raised years ago. Likewise, If McDonalds and others could charge more for their product.....they would!  
Ok.....I'll take the bait you say. What will happen? The answer in all of its glory is simple, the labor market will shrink. That is companies will refuse, or flat out be unable, to pay the new rate for labor.  But don't they need someone to make their hamburgers? Of course they do....but while Rosie takes potty breaks, Sparky does not.  They will decide instead to use automation to replace that labor. A recent study shows that employers will use automation when said machines are 15% cheaper than human labor. 

Therefore if we suddenly double the minimum wage to $15 from $7.50, this will give business no time to adjust and force the change to ore automation. I use the example of an aging paint company needing to automate as a way to keep prices competitive in my economics class. If the company does not modernize they will but forced to close down. Yes, buying the machines means less workers will be required, but that is how it gos.
In the end what we want is as many jobs available as possible. If entry level workers are not able to find jobs, they will become a drain on society later. Look at Greece, where the youth unemployment rate is over 50%! Or other cities/states that have high unemployment among the young adult population like Detroit/Michigan. We also lament over the fact that many recent college graduates are unable to afford to afford an apartment in the cities they live in or even have a hard time finding work.  This is due, in no small part, to the fact that they have little to no experience before and/or during their university years.

We unfortunately love immediate gratification in this country. As a negative, when the reverse happens....we do not notice.  That is, when we implement a plan if we do not see negatives right away, we consider it to be a positive plan. The effect of raising wages to $15 an hour will be that while some have a better paying job; in 2-3 years many will be out of work all together.  Think we pay a lot for Welfare benefits now? Just wait and see what happens.
1 Comment
Meow link
6/16/2017 12:04:39 pm

I agree that a higher minimum wage will speed automation, which will increase short-term unemployment. But is that a bad thing?

If we could eliminate menial labor entirely, as a society, shouldn't we? I think so. If we can get robots to feed us, clothe us and house us, we should. This will free up humans to do more meaningful work- teaching, contemplating, creating beauty, and designing bigger better robots. It will take some time for laborers to adapt to the new jobs, and we may have to keep them from starving in the meantime, but keeping the old jobs on life support doesn't do anyone any favors long-term.

I think we need to stop equating work ethic with worthiness as a person: work ethic has nothing to do with output or utility. If you work very hard and produce very little, are you more entitled to survival than someone who produces a lot but barely works? Nature says no.

Reply



Leave a Reply.

    Archives

    September 2017
    February 2017
    December 2016
    May 2015
    December 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014

    Categories

    All
    Basic Economics
    Bernie Madoff
    Capitalism
    Career Planning
    Compound Interest
    Discounts
    Divergent Thinking
    Education
    Entitlement Nation
    Get A Raise!
    Government Regulation
    High Cost Of Bad Credit
    Housing
    Human Rights
    Income Inequality
    Investing
    Keyston XL Pipeline
    Low Cost Food
    Millennials
    Minimum Wage
    Mobile Payments
    Money Mistakes
    Obamacare
    Pay Envy
    Personal Responsibility
    Reaganomics
    Retirement
    Saving Money
    State Of The Union
    Statistics
    Tax The Rich
    Time Value Of Money
    Ukraine
    Wage Gap
    Wal-Mart
    Wealth Redistribution

    RSS Feed

Social Media: Share our page with your friends

Join our mailing list for special updates and product offers

    One winner drawn at random for a gift card monthly!

Submit
Proudly powered by Weebly
✕