Why Is a $15 an Hour Federal Minimum Wage a Terrible Idea?

Federal Minimum Wage $15?

A $15 an hour federal minimum wage might sound like a good idea. This is particularly the case if you are currently earning a low wage. There is no argument that living on a low hourly pay rate is a challenge. However, raising the federal minimum wage to $15 will not likely have the outcome many people are hoping for.

The politicians in Washington that are proponents of a $15 minimum wage claim that it will raise the pay rate for people to one that is a livable wage. Although the Congressional Budget Office estimates a rise in the minimum wage to $15 would increase the income of around 7 million people, the increase in wages would also result in a loss of 1.3 million low-end jobs, according to the Department of Labor.

Raising the minimum wage to the level of $15 an hour has been a hot topic in politics and several career politicians are adamant about getting policies pushed through that would accomplish this. Yet, just like many ideas disconnected government representatives believe are good might have opposite consequences. Results that could impact low-income families much more than just having a low wage.

Government policies of trickledown economics never seem to work like politicians believe it should and almost doubling the minimum wage to $15 an hour is not going to ultimately make the positive impact so many people believe it will for several reasons.

A $15 federal minimum wage won’t truly benefit everyone it should.

The truth is when it comes to minimum wage not that many people earn just the minimum. The reality is that the typical minimum wage worker is a high school student or someone retired that wants something to do. The statistics show that minimum wage workers are not often the head of a household and almost half of the people that earn the minimum are under age 25.

Supporters of a $15 minimum wage claim that it will bring millions of families out of poverty and provide a living wage. However, the average minimum wage earner often goes home to a family that already earns an income near the American median, which is about $68,000 per year.

Because most minimum wage workers are not the head of a household or supporting an entire family, a $15 minimum wage is not going to have the impact so many people believe it will. It is estimated that only about 2.3% of employed Americans earn just a minimum wage. Moreover, many industries in hospitality that do earn a minimum wage also receive an income from tips pushing their wages often to more than just $15 per hour.

Most people earning low wages are not actually living in poverty. They do have low incomes but do not live in what would be considered true poverty as politicians in Washington claim.

A rise in the minimum wage to $15 will result in a loss of jobs.

For people that are brought up to work at $15 an hour as a result of the increase of a federal minimum wage, it would be great. But the ultimate result would be a loss of jobs. People that might have been earning $10 or $12 per hour might no longer have work. Several states have a median hourly wage of less than $20 per hour. Establishing a minimum wage in these states that is close to their median will price several workers out of their labor market.

Large corporations with a national or global footprint might be able to increase their wages without a problem and they should have likely done this some time ago. However, small businesses would not likely be able to absorb the changes financially. Smaller business owners would need to cut working hours or the number of employees they have to pay their employees more. This is even if they can do so and keep their doors open.

Even though some larger companies could easily pay their employees more, this doesn’t mean they would automatically do so. With so many large global corporations outsourcing more of their labor in favor of lower costs, why wouldn’t a rise in minimum wage just escalate the practice of outsourcing cheaper labor?

The business world in America is not what it once was decades ago. At one time companies cared about the people they employed and took pride in their work. This is no longer the case. Today’s large corporate world is an environment of answering to shareholders and enriching them along with the executives that run these companies. Do you think large companies will just sit by and accept lower profits in favor of an increase in the minimum wage? The answer is likely no.

Raising the federal minimum wage to $15 will result in a loss of jobs and it will genuinely hurt a lot of small businesses. There is no way it can’t and several economists agree. The Congressional Budget Office even did a study of a proposed raise in the minimum wage finding that an estimated 1.4 million jobs would be lost.

A $15 federal minimum wage requirement doesn’t account for geographical differences.

It shouldn’t come as a surprise that the cost of living is much different in areas around the country. Someone making $15 an hour in a large city will be much different than a person making the same amount of money in a rural area. A flat $15 minimum wage will certainly benefit people in areas where the cost of living is low.

Mississippi is said to have about an average hourly wage of $15 an hour for most of the people working. Change the minimum wage to $15 and every worker would then be earning the average hourly pay in that state. The result of this would likely be that every employer in the state would have to adjust its wages higher to account for a much larger minimum wage.

What happens to higher wages when the minimum wage is raised to $15 an hour?

The federal minimum wage is currently $7.25 an hour. Each state does often have its own set minimum but what would happen if this $7.25 an hour was more than doubled to $15? For someone earning for example $20 an hour compared to a person making $7.25 currently, what happens to this higher income when the minimum wage is brought up to $15?

I can almost guarantee you that a person making $20 an hour will also want a raise to accommodate the increase in the minimum wage to $15. That person will likely want to start earning at least $27.75 an hour. If the person earning $7.25 gets a $7.75 raise, why shouldn’t the wages above this also be moved up accordingly?

Workers want to be compensated for their education and experience. If the minimum wage goes to $15 an hour, everyone from a next-level employee earning slightly more to a company CEO is going to want to be compensated based on the rise in hourly pay for a minimum wage employee.

High-paid executives and CEOs are not going to sacrifice their income.

If there is one thing most people should have learned by now is that executives, CEO’s and shareholders are not going to sacrifice their income to accommodate a higher minimum wage. In many regards, CEO’s earning 1000 times an average employee could easily cut a few million out of their pay and or bonus to distribute a much more reasonable pay rate for a lot of people that work for them. However, this is never going to happen.

High paid executives and shareholders are not going to sacrifice their lifestyle for a higher minimum wage.

Company boardrooms will look for ways to cut costs to pay the people that work for them more. Yet, this will not include cutting the money those people in that same boardroom earn. The cuts will almost certainly come from cutting employees, their benefits, and hours. Other cost-cutting strategies will also be used that might be putting employee safety at risk or producing a lower quality product.

Small business owners will be no different when it comes to retaining any profits they have. This is almost more understandable compared to a large corporation. Most small business owners take on large risks for possible rewards. They are not going to give those rewards up to increase the minimum wage for their employees. The result will likely be fewer workers with more work and responsibilities.

Personally, I don’t believe a rise in the minimum wage to $15 an hour or even tax breaks for large companies makes a difference. The term trickle-down economics might have worked decades ago. However, today the corporate world is more geared to greed and rewarding shareholders. Fewer profits at the expense of a higher minimum wage equate to cutting costs. Tax breaks for corporations just equal larger profits at the top and for investors.  

Prices will go up with a $15 minimum wage.

Probably one of the easiest ways for a business to absorb a rise in wages is to increase the price of their product or service. A $15 minimum wage is sure to be shortly followed by higher prices. Thus, it will somewhat be a wash between improving the standard of living for a lot of people and bringing them out of poverty. Higher prices probably wouldn’t set in immediately but it wouldn’t be long before this would happen to make up for a $15 minimum wage.

Higher prices for products and services as a result of a $15 minimum wage would be a problem that everyone would need to absorb. This would include consumers and even business owners themselves as it wouldn’t be long before they would pay more for the supplies and services, they purchase to operate their business.

Illegal immigration is already a problem.

America is often thought of as the land of opportunity. This has made the United States a place where people from poorer countries around the world want to go and work. Wages in America are much higher along with the benefits that come with them. People immigrate to the U.S every day both legally and illegally because there are more opportunities available for them compared to their home country.

The problem with immigration often is the money earned in America is sent back to their home country. Thus, the economy in America does not get the benefit it should from immigrants working in the country. A $15 minimum wage could make illegal immigration even much worse than it already is as more people naturally want to make more money. The opportunity to earn three or four times more compared to what someone might earn in their own country would certainly incentivize a person to cross into America illegally.

I understand why people want to enter America legally or illegally from other places around the world. This is particularly the case when they can improve their economic situation and make a better life. The issue is when the minimum wage is raised to $15 this will be a real encouragement for more people to immigrate into the United States.

There are issues with raising the minimum wage to $15 an hour but it does need to increase.

I can’t argue that a federal minimum wage set currently at $7.25 is ridiculously low. It hasn’t gone up since 2009 and it is certainly overdue for an increase. The question isn’t really that the minimum wage should go up but how much should it increase? Even with the proposed growth to $15 an hour not taking place until 2025, this amount does seem like it might be too much in a short amount of time.

The proposal of a $15 minimum wage by 2025 does give businesses some time to slowly bring their minimum pay rate up. However, more than doubling the minimum wage in four years would still be a challenge. Furthermore, it would be a difficulty that many small businesses would have a hard time with compared to several large global corporations.

The real issue with a $15 minimum wage in just four years is that in that short time it would probably need to be brought up even further to keep pace with the economy. The idea of a higher minimum wage is that it would bring people out of poverty and provide a better standard of living. As costs, such as healthcare and education, increase over the next four years at the fast pace they have been that $15 an hour will almost certainly not keep up.

With the price of healthcare, housing, and education, even a $15 an hour wage today would be a challenge to make ends meet. This amount of money in four years will be worth much less.

Final Word

Lifting the federal minimum wage to $15 an hour is not going to have just the positive impact so many politicians in Washington claim. The idea sounds like a good one to someone earning just the minimum but bringing up the minimum wage to $15 is likely to have a lot more negative impacts than positive.

I can’t argue that the federal minimum wage does need to be brought up from $7.25. Yet, the real problem is more likely that some companies can and should pay more than just the minimum. These businesses just pay the absolute minimum because they can. Just because they can doesn’t necessarily make it right.

Decades ago, business owners and company CEOs providing for the people that make a company profitable was viewed as the decent and right thing to do. Today, this has changed and greed has taken over. The real problem with the minimum wage in America isn’t that it is indeed low, but that more companies that could even afford to pay more don’t. Profits are reserved for executives and shareholders rather than the people that make a business successful.

Companies should have the right to pay what they feel is fair for a job. Capitalism does have some merit to how an economy should work. Yet, America I feel has left capitalism behind in favor of greed at the expense of the American worker. A $15 an hour minimum wage is not going to solve poverty. Almost doubling the federal minimum wage is not going to make changes for the people that truly need a higher wage. The only thing it is likely to change is how most businesses operate to retain the profits they have become accustomed to.

The federal minimum wage in America does need to be higher but the real changes need to come from company values and the people that run them. Workers need to be valued like they were at one time and companies need to start recognizing it is not just one person the makes a business successful. Everyone contributes to the success or failure of a company and each person in a business should be rewarded for its achievements. If a company can easily afford to pay more, they should when that business is successful. Government shouldn’t have to step in and make it so companies treat people the way they should be treated.

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