Increase of Minimum

Wage

The Battle of the Ages

Increasing Minimum Wage

• A continual fight to bring minimum wage and living wage closer together.

• Minimum Wage = minimum hourly wage an employer can pay an employee for work.

• Living Wage = a wage that is high enough to maintain a normal standard of living.

Minimum Wage

• Facts about minimum wage:

• Aged 25 and under make up over 50% of minimum wage workers.

• Over half of U.S. states raised their own minimum wage.

• Minimum Wage varies from $7.25 - $10.55

• Food service industry largest employer of minimum wage workers.

• Many employee increase wages after one year.

Increasing Minimum Wage

• Current minimum wage salary is below poverty line for household of 2.

• Many people want minimum wage to equal living wage.

• Many families rely off government aid

Increasing Minimum Wage

• Many people see pros but not the cons

• More negative outcomes to minimum wage increase than positive.

• Reduction in workforce

• Cost passed to consumers

• Driving prices up across the board

Reduction in Workforce

• Companies will have less hours to give or less jobs to have

• Less skilled/ less experienced could lose job

• Less room in the budget

Reduction in Workforce

• Companies may move to automating processes

• Eliminating the need for many employees.

Reduction in Workforce

• Automating processes

• Many chains already looking into/ testing robots to reduce workforce

• Many grocery stores already offer self-checkout

• Some restaurants offer electronic pad to place order, removing waiters.

Cost passed to consumers

• In the case of minimum wage increase consumers may take the hit

• Increase in customer self-help

• Increase in prices of products

• Consumers pick up slack

Current Minimum Wage Issue

• Fight For 15

• 2015, workers all around U.S. began striking against low wages

• Employees want minimum wage increased to $15/hr.

• More than 50% raise from previous min. wage.

• Increase to $15 would raise restaurant total cost by 15%

Fight For 15

Increasing Minimum Wage

• Increase in minimum wage = increase in labor costs

• Needs to be offset in another place, like:

• Costs to consumers.

• Reduction in workforce

• Fewer hours available

• Loss of jobs

• Automating processes

Efficiency -Wage Theory

• Higher wages may increase performance and cut costs.

• Gives a better applicant pool to choose from.

• Increases effort by employee, reducing supervision

• Only works if employer has strong recruitment process.

• Could still lead to lose of employment.

Consumers are willing to front the bill, but for how long?

Economic theories on minimum wage

• Neoclassical model

• Can lead to unemployment

• Monopsony labor market model

• Leads to unemployment

• Harris- Todaro model

• More likely to become unemployed

Minimum Wage Increase

• Lack of positives, neutral at best.

• Minimum wage increases doesn’t decrease poverty.

• Other methods than minimum wage increase should be explored.

• Thoughts?

Referenceshttp://journalistsresource.org/studies/economics/inequality/the-effects-of-raising-the-minimum-wage

http://www.fool.com/investing/general/2014/06/08/what-will-a-higher-minimum-wage-cost-you-at-mcdona.aspx

http://www.heritage.org/research/reports/2014/09/higher-fast-food-wages-higher-fast-food-prices

http://www.forbes.com/sites/darrentristano/2015/07/23/minimum-wage-issue-exerts-maximum-impact-on-restaurant-industry/

http://www.pewresearch.org/fact-tank/2015/07/23/5-facts-about-the-minimum-wage/

http://fortune.com/2015/08/24/problem-raising-minimum-wage/

http://www.kcra.com/news/local-news/news-sacramento/sacramento-city-council-passes-minimum-wage-increase/36084550

https://www.minimumwage.com/

http://www.raisetheminimumwage.com/facts/