The Problem With a $15 Minimum Wage

If businesses are required to pay higher wages, they'll hire fewer employees.

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Protesting fast food workers demonstrate outside a McDonald's restaurant on New York's Fifth Avenue, Thursday, Aug. 29, 2013.
Protesting fast food workers demonstrate outside a McDonald's restaurant on New York's Fifth Avenue, Thursday, Aug. 29, 2013.

At the height of the recession, the U.S. had an unemployment rate of 10 percent. Since the economic recovery began in January 2009, irrespective of one's views about the health aspects of fast food, these restaurants have added jobs more than twice as fast as the U.S. average, which has helped lower the unemployment rate to 7.8 percent.

Demonstrations by workers and union officials are now taking place across the country, claiming that it is not enough to provide a job, but that companies "owe" employees a higher salary that provides them a "livable wage" – currently being proposed at double the existing minimum wage, to offer employees a certain level of economic security and dignity.

As an example of how this impacts companies that have large numbers of minimum wage workers, it is estimated that a wage increase to $15 an hour would cost McDonald's $8 billion. The negative impact wouldn't be felt just with workers, by hiring less, but would also impact investors, suppliers and customers, who would pay increased prices.

Different jobs require different skill sets and are compensated based on the market value for the aptitude required and the service rendered. When defining what amounts to a fair wage, shouldn't the fair question be what corresponds to the market value of what the worker produces?

[See a collection of political cartoons on the economy.]

President Obama recently called for the raising of the minimum wage saying, "nobody who works full-time should have to raise their children in poverty." But, in a free market system, should we allow for workers and employers to contract with one another based on an above-board, negotiated rate or attempt to dictate standards of living through minimum wage adjustments?

Recently, Walmart announced that it was prepared to invest in Washington, D.C. and open six new stores, projected to create 1,800 jobs, albeit many at a mandated minimum wage rate of $8.25. But, the D.C. City Council voted to force them to offer a higher minimum wage of $12.50. Without a veto by the mayor, Walmart has since announced that they will pull out of the D.C. market, rather than pass along the higher labor costs to its customers. 

The council attempted to bully a large corporation by changing an existing minimum wage law and, in the end, denied 1,800 people a chance to work. The council members can indeed boast that they fought and stood on the side of workers, but the reality is that there are now 1,800 fewer jobs in D.C. Where I'm from, that's called winning the battle and losing the war. 

[Vote: Should Fast Food Workers Strike for Higher Wages?]

While an extraordinary amount of focus of late seems to be on the hourly wage worker, what seems to be missing from the debate is the opportunity for upward mobility. 40 percent of the executives at McDonalds started out receiving an hourly wage. 50 percent of McDonalds franchise owners were at one time hourly wage employees. Similarly, Walmart gives out more than 160,000 promotions a year. These are all individuals who are able to gain a higher wage and better standard of living through experience and on the job training, gaining the kind of skill sets needed to live out the American dream. 

To move America forward, the protest shouldn't be directed at those employers that provide jobs, but about how we put the policies in place that encourage more hiring, increase productivity and lower costs to do business. There need to be policies in place that allow for entrepreneurs to make their dreams a reality and extend opportunities to others. 

A recent report noted, "without entrepreneurs, there would have been no new net growth in the U.S. for the last 20 years." Policymakers need to continue to strike a balance on government regulation that puts the necessary safe guards on industry, while not choking the ability to innovate, grow and create more job opportunities, promotions, and advancement.

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