Drawbacks of Raising the Minimum Wage

Raising the minimum wage to $15 an hour has grown in popularity over the past few years. On the surface this law seems fair and reasonable, but in-depth analysis recognizes the issues that come along with this policy. A $15 minimum wage hurts the people it is trying to help because businesses are unable to afford their labor while still remaining profitable. Here are a few reasons why an increase in the minimum wage is not a good idea:

  1. Increase in the Cost of Living – Peter Schiff, CEO of Euro Pacific Canada Inc., argues that increasing the minimum wage would increase operating expenses, which would lead to an increase in prices to cover labor costs. This would negate any perceived advantage of this legislation because all it would do is increase the cost of living. Increasing the minimum wage would not make items more affordable.
  2. Job Losses Another problem Economists have highlighted is that an increased minimum wage would result in job losses. Businesses would have to cut jobs to maintain profitability. In 2013, the CBO conducted a report, which estimated a loss of 500,000 jobs due to an increase of the federal minimum wage to $10.10. Other estimates indicate a higher amount of job losses assuming companies would outsource labor to other countries.
  3. Increased Competition for Minimum Wage Jobs – Workers who are overqualified would compete for low-skilled positions. As a result, a higher minimum wage would discriminate against workers seeking to acquire skills. Low-wage positions exist for unskilled workers to develop so that they become more productive later in life. Increasing the minimum wage would hurt these unskilled laborers because they would be unable to find a job.

In conclusion, increasing the minimum wage to $15 would do more harm than good. When someone is young, they must accumulate skills, so their work becomes more valuable as they grow older. Minimum wage jobs are not supposed to be jobs to support a family. Instead, they are intended for the young and inexperienced. As more states and cities push for a “living wage” they will also begin to experience negative economic impacts that will ultimately put small-businesses out of operation.