The minimum wage is often lauded as a way to help low-income workers make ends meet. However, the reality is that the minimum wage does more harm than good. In fact, it can actually lead to increased unemployment and poverty.
The minimum wage is a government-mandated price floor on labor. This means that employers are not allowed to pay workers less than the minimum wage. The current federal minimum wage is $7.25 per hour.
The intent of the minimum wage may be noble, the reality is that it often hurts the very people it is meant to help. One of the most basic principles of economics is that when you increase the price of something, people will demand less of it. In the same way, when the government forces employers to pay workers more through minimum wage laws, those businesses will in turn find ways to reduce their demand for labor. As a result, fewer people will have jobs and those who are still employed will see their hours reduced.
One way the push for a higher minimum wage taking its toll on workers is in the increased use of automation. Each year it seems the customer service experience evolves, and maybe not for the better, as businesses find new ways to remove workers from the product delivery experience. It seems to have started with the self-checkout lane, then self serve kiosks, and now smart-phone apps incentivize consumers to order ahead with discounts, points, and perks to reduce employee need.
Though some may voice their frustrations about the decline in customer service, it doesn’t seem to be stopping retailers from using automation to make it easier and cheaper to provide services without the need of human workers. Sure, automation can make consumer experience more efficient and cost-effective for businesses but at what cost?
The advancement of processors and algorithms has given consumers an enhanced shopping experience, even if it means job losses for some workers. While it might be far-fetched to say that the push for a higher minimum wage is what motivated automation to target other jobs, there’s no doubt that business has experienced the benefits of automation and are actively exploring how it can be applied to other roles. It used to be thought that the risk of automation was only a concern for lower skilled roles but with the advancement of artificial intelligence, far more workers are at risk.
And why not. Algorithms don’t need healthcare, vacation, overtime, or call in sick. Aside from the occasional downtime due to a network glitch or software update, an issue redundancy can help address, algorithms can remove many people oriented issues from the workplace.
Although there are drawbacks, many businesses have concluded that automating processes is still worth it and fighting for a higher minimum wage may only be adding fuel to the fire. Increased automation is saving labor costs, leading to more job losses, and adding to the gap between those who profit from automation and those who suffer its unintended consequences.
But what if you are a smaller business without the ability to pay for expensive automation systems? Small businesses often operate on tight margins and cannot absorb large increases in labor costs like larger businesses can. Increases in minimum wage disproportionately hurt small businesses and entrepreneurs. As a result, they are forced to reduce labor hours, lay off workers, or even close their doors entirely when faced with a higher minimum wage.
So what if the concern about minimum wage was off the table. Would workers suffer by businesses taking advantage of them or might businesses find they need to pay a more attractive wage to get the help they need to operate. Could it be that no minimum wage is a better way to go?
No minimum wage could create a more competitive labor market, giving both employers and employees greater bargaining power which could result in higher wages and ultimately increase living standards for those at the bottom of the income ladder. It’s something worth considering as we look for ways to lift people out of poverty. It seems that if we want to protect those at the lower end of the income scale, we must find new ways to help them that don’t rely on arbitrary price floors for labor. Only then can everyone have an equal opportunity to do what they love and earn a living wage. If we want to help workers, we should abolish the minimum wage and let market forces determine wages instead.
