Wandschneider: Raising minimum wage has multiple economic ramifications
February 11, 2014
In President Obama’s State of the Union Address, he promised to try and raise the minimum wage to $10.10 from the current $7.25. Now, this seems like a great idea, having a higher minimum wage means more money being made. As a result, there is higher consumer activity, so there is a much better outlook for the nation’s economy. This idea could solve the economic crisis that has our nation has been facing since 2008.
This idea is nothing but a sugar coated fantasy.
The proposition of making $10.10 an hour seems tempting, but if the minimum wage is to be raised, our nation will face serious consequences. Minimum wage is supposed to be a wage for entry-level positions, mostly for small, part-time jobs that students get. It is not intended to be the salary that one will have until retirement. Even if a job starts off making $7.25, chances are high that the pay will increase over time.
Now, let us say that the minimum wage is changed. Now workers are making a steady $10.10 instead of a measly $7.25. It is payday and the dollar amount on that check has skyrocketed. Life seems good, finally a pay that workers feel like they deserve. This gratification does not for long. Soon after, that big check isn’t purchasing as much as it had been before. Simple grocery items, like milk, have nearly doubled in cost. After more time has passed workers are being laid off because companies are unable to afford all of their workers.
How did such a great idea turn into one big mess?
First off, as the wage increases, so does the amount of money that the business has to shell out to pay the new wages. As a result, more money needs to come in, so the prices of goods and services are raised. After awhile, that $10.10 starts to feel like $7.25 again. Then we have the increase minimum wage debate all over again.
The job market is also put into jeopardy. By raising what the minimum wage has to be, workers will want their salaries adjusted accordingly. If those salaries are not adjusted high skilled jobs will not seem as meager.
With such an increase in wages, businesses may have to cut their work force in order to stay within their budget. This results as a higher unemployment and a much smaller job market. Currently, there is a surplus of people looking for jobs. In raising the minimum wage, it will be much harder for people to find jobs.
Not only will companies hire less people, many will start outsourcing their jobs to foreign countries. Businesses are able to receive cheaper labor than here in America. Most of us have all had to deal with those frustrating customer service calls that are transferred to some other country and the operator hardly speaks English. If this plan is put into action, all customer service calls could end up like this.
But not all jobs can be moved to foreign countries so — to cut back on the workforce at home — some companies will use robots. Robots do not require a salary so it is a much cheaper and easier for the business. Robot use is even happening with the minimum wage that is currently placed.
Take a visit to the local Wal-Mart. At the end of all of the checkout lanes there is a self-checkout area. This isn’t placed to make it easier for customers to quickly purchase their one item, but to save on labor costs. Those 15 computer operated lanes translate into 15 less workers that have to be paid.
Raising the minimum wage seems like an excellent idea to get America out of this recession; but like all big problems the answer is never that simple. If this plan is to be passed, our country will spiral deeper and deeper into an economic crisis. Not only will prices be unbelievable high, job opportunities will be taken away from the citizens of this country.
Instead, let’s be thankful for the fact that we are guaranteed a reasonable minimum wage. A minimum wage is not intended to be permanent. With hard work and dedication, that wage can be raised. After all, aren’t those two values something that Americans take pride in?