Every couple of years there is public debate about increasing the minimum wage.
Most recently, there were strikes outside of McDonald’s with people calling for a $15 minimum wage.
The claim is that an increased minimum wage will lift people out of poverty. However, the truth is that a minimum wage of $15 per hour would increase the poverty line.
On multiple occasions the Supreme court has struck down minimum wage laws, arguing once that “it may be said that if, in the interest of the public welfare, the police power may be invoked to justify the fixing of a minimum wage, it may, when the public welfare is thought to require it, be invoked to justify a maximum wage” (Adkins v Children’s Hospital of District of Columbia, 261 U.S. 525 (1923)).
Minimum Wage was again struck down by the Supreme Court in 1935 when they invalidated the National Industrial Recovery Act of 1933 with Justice Louis Brandeis stating, “this is the end of this business of centralization, and I want you to go back and tell the president that we’re not going to let this government centralize everything.”
The first Federal minimum wage law to stand was the Fair Labor Standards Act of 1938.
Another startling fact about minimum wage is that labor unions are often leading the charge for an increase.
Why would labor unions do this?
Richard Berman, the executive director of the Center for Union Facts, explains “some unions and their members directly benefit from minimum wage increases—even when nary a union member actually makes the minimum wage.
The Center for Union Facts analyzed collective-bargaining agreements obtained from the Department of Labor’s Office of Labor-Management Standards. The data indicate that a number of unions in the service, retail and hospitality industries peg their base-line wages to the minimum wage.”
One thing that people often forget about minimum wage is that the lowest wage earners are also the people who are harmed by an increase.
Let us consider the striking McDonald’s worker. If McDonald’s were to increase their wages to $15 per hour, the company could either take from their profits, increase their prices and/or cut their staff. If the $5.5 billion annual profit from McDonald’s was distributed in hourly pay raises to the 1.8 million employees, it would only equal a raise of $1.47 (assuming every employee worked 40 hours per week)!
Adding $1.47 to $7.25 is still a far cry from the $15 per hour that employees are requesting.
The most likely option is that McDonald’s (and other businesses) would raise prices and cut staff.
In fact, some McDonald’s locations in Europe recently added 7,000 touch-screen kiosks to handle cashiering duties.
This is in addition to the countless self-checkout kiosks that exist in grocery stores worldwide.
If minimum wage is increased, it won’t be long before a computer is stocking shelves and cooking fries.