Congress is poised to consider raising the federal minimum wage to $15 an hour. Don’t fall for the hype.
Yes, some workers would benefit from a bigger paycheck, but many will lose out. They’ll lose hours, jobs, and future opportunities. Even worse, a wave of entrepreneurs and business owners across the country may close their doors for good.
The perspective of a restaurant franchise owner, who employs over 600 workers at multiple locations in two different states, caught my eye this weekend.
So often employers are treated as big, faceless, and soulless entities that mistreat their workers for the sake of the bottom line. It’s assumed that new mandates on pay and benefits will be easily absorbed by these deep-pocketed companies and that they won’t respond.
The reality is that small, mid-sized, and regional employers often take the brunt of these costly mandates. They care about their customers and their workers and will try to keep both happy. When cost-cutting and price increases aren’t enough, some go out of business.
That’s the argument Larry Fox, who owns Homestar Restaurant Group, made in an opinion piece for the Wall Street Journal about the effort to raise the federal minimum wage:
I’ve pondered my options, and there are no good ones. My customers are price-sensitive; increases in the wholesale cost of chicken have already forced us to raise menu prices, and there’s not much room to offset even a modest increase in my employees’ base wage through further hikes. Some restaurants have embraced self-service technology…
In my case, I’d almost certainly have to close up shop and look for another line of work. That would be a tragedy for my roughly 600 employees. Our staff tends to be young, and they appreciate the flexible schedules that allow them to go to school or attend to other priorities. Some of my longtime employees have worked their way up in the company. Our current director of training got her start waiting tables.
Fox points out several ways employers will respond to a $15 federal minimum wage:
Raise prices for customers.
Cut pay and benefits for workers.
Close their doors.
None of these choices is appetizing for workers, but this is the reality of a policy that may be well-intentioned (i.e. raising take-home pay for the lowest-paid workers), but will have devastating consequences.
Not only do younger workers lose out on skills and experiencing-building opportunities, but low-wage workers face being entirely replaced by robots, a shift that is underway in the food and beverage industry.
The job market is hot and workers are finally seeing their wages rise. With over 7 million unfilled positions, workers can leave their jobs and find better opportunities.
Boosting the federal minimum wage could erode those job gains and inflict long-term damage that will be hard to recover from.