Minimum wages are being hyped up now in society. Many people think this is all a win for everyone, especially those at the bottom of the ladder. But is it really all sunshine and rainbows?

The Reality and Problems

Extra Costs

The employer needs to pay more for each employee. Companies don’t just keep all the profits as profits. There are costs to sustain and keep the company growing. This reduces the money the company uses to expand, hire more employees, research and development, maintenance, get new equipment, replace old equipment, etc. There are also stock dividends and bank fees and loans that often need to be paid.

Higher minimum wages mean channeling the money away from these aspects of the business. To keep these aspects going, reducing costs would be required, possibly to lay off employees. Spending within the company would stay the same, but output from employees working would decrease over time due to less employees being there, and the product or service in the market place would be reduced in quantity or quality, leading to less revenue. This can possibly lead to a downfall of the business.

Prices Go Up

When costs go up, from minimum wage increases, so too does the price of the product or service. For a customer, this reduces the demand because people will buy fewer products or services at a higher cost, compared to more at a lower cost. The employee who produces $10/hour and was paid to reflect that, but is now being paid more to produce the same $10/hour of the good or service for customers. This makes the business costs go up overall. Keeping someone employed that produces less than they are paid is a losing position for employers.

Skills Rewarded

No matter your skill level, now you get a minimum amount of money for your lower skills. Cost of labor increases for the employer, as explained above. When costs of employment get too high, these lower skilled workers are the first to get axed to reduce costs.

Their increased minimum wage ends up having them lose their jobs because they are the least productive or least skilled compared to people who know more or do more and already are paid to reflect that.

When the wages go up, the job is in more demand and attracts more applicants with higher skill levels. Those who are most disadvantaged and need a job, will be the most affected through not being able to compete int he job market.

The lower end placement in the business normally allows them to learn skills to progress upwards, but now they can’t, because more skilled people are getting the jobs first. This knowledge of skills they would have gained if they started at the “bottom”, would help them in the future, not only at this company, but from getting into other companies.

Also, many companies use their revenue to reinvest in employees by helping to train them. When costs increase due to minimum wages, this potential avenue of support to help people increase their skills also evaporates.

The only avenue they have, with no money to pay for education, is to offer their labor for free as interns in order to gain the skills they would have gained as lower paid employees, or to forgo trying to get into a particular business at all.

Minimum wages keep the unemployed unemployable by preventing them from gaining the work experience that would help them succeed.

Giving More than the Minimum to Help the Company Succeed

Most people agree to work for a wage, and also do more than the minimum required by contract to help the company succeed. In return they have the possibility of being recognized and gain more income, but also gain more value and respect within the company. These expectations are good incentives for people to do more than is requested from them.

When minimum wages are implemented, many employees may see a reduction in their wages to compensate for the extra cost the employer incurs. This deincentivises them to give more to company because they are getting less in return. They have been devalued. They can reasonably assume that their future stake of value in the company may also be affected.

Most Employers Pay Above Current Minimum Wage

Employers pay some people at minimum wage, depending on their skills, and especially when they join the business. As time goes by, they become more trusted and valued and usually make more money. Not only are the increased costs preventing people from having their wages increased voluntarily by the employer, but when they lose their jobs due to increased costs that are enforced by a centralized coercive government, they will have a much harder time to find another job at their low skill level.

You Actually Have a Job, Rather than No Job

Having a low paying job, that you choose to agree to work for and receive money to sustain your life, is better than having no job at all. If someone wants to take a job then they can. Coerced minimum wages remove this possibility for many who need to start at a lower rung and work their way up.

Automation

All of these factors come into play with the advancement of robotic automation. Why pay someone a forced minimum wage that affects your costs overall for the year and affects your businesses survival, when you can put a robotic system to work for a fraction of the cost and enhance the success of your business? True, at first the cost may be higher than paying someone a weekly wage, but in the long run, the company would save money.

Minimum wages increasing costs will incentive employers to replace human employees, helping to train them, etc., with robotic system investment that will pay off in the long run. When an employer needs to choose between ensuring the future of their business and ensuring their own success and survival, or helping another human remain employed minimum wages increased expenses, they will choose themselves and their business.

Conclusion

Those who promote minimum wage hikes assume all employers make enough money to cover these costs while still making a profit or breaking even. Small business can’t usually afford to maintain coerced wage hikes, while also affecting their loss of business from hiking costs to the customer and losing business as a result.

Those who promote minimum wages also ignore the moral relevance. In the end, minimum wage coercion is immoral not only because it’s coercion, but because it affects the economic survivability of many people’s lives. Yes, there are some fat-cat mega-corps who reap the profits from the labor of their employees and should increase the wages of those who make the company a success. But enforcing minimum wages for everyone is damaging for the economy as a whole, and even forcing these larger corporations to do so isn’t a moral thing in itself.