This commentary, AIMS Research Intern Andreas Korfmann explains why raising the minimum wage – though done with good intentions – can have unintended consequences, particularly for small businesses, young people, unskilled workers, and low-income families. Minimum wage proponents argue that living costs are rising faster than wages, leaving the poor poorer. Though a valid concern, studies show there is a direct correlation between increased minimum wages and higher levels of unemployment, rendering this policy more harmful than effective.
When the minimum wage is raised, it generally has little effect on large businesses, such as the example of the major fast-food chain. A small food service business, however, already struggling to compete, would be greatly affected by a minimum wage hike. Generally, these policies leave small businesses with an unfortunate choice: raise prices, or fire workers. In addition, minimum wage increases result in price increases as a means of companies compensating for the higher wages they are suddenly forced to pay.
At a time when unions are striking because their wages ‘haven’t increased at the rate of other public sector salaries & the minimum wage’, and with unemployment becoming the next big topic in American politics, Korfmann argues in Good for you, if you have a job (and keep it) that we should pay more attention to the outcomes of imposing price & wage floors on our economy.
Click here to read the full commentary.