What Happens When Minimum Wage Essay

One of the biggest negative effects of raising the minimum wage is that it would severely hurt small businesses. If the minimum wage were to be raised it would force the owners to pay their employees more money that they might not have. In order to pay the employees the newly raised minimum wage they are gonna have to raise the prices which will lead to the loss of consumers, and might eventually lead to the store going out of business. According to a Gallup poll done in 2013, 60 percent of small-business owners said that raising minimum wage will “hurt small business owners. James Richardson, MBA, Vice President of the fast food chain White Castle, said that the company would be forced to close

Several examples of data and statistics from studies elucidate the harmful effects on small businesses and in addition the compelling of companies to close as a result of the increase of minimum wage. According to a Gallup poll that took place in 2013, 60% of small business owners agreed that an increase in minimum wage would be harmful to their small businesses (Should the Federal). Small businesses do not have the money supply that chain corporations do. Naturally, if they had to pay their employees more, it would be harmful to them. Several Walmart stores have closed and Walmart stores that were yet to open have closed as a result of an increase in the minimum wage (Should the Federal). An increase in the minimum wage must even have harmful effects on larger businesses. They obviously employ several more people than a small business, so they have to pay each worker more resulting in a net loss of a lot of money from the chain. Additionally, in several work places, if the minimum wage were increased, the wages of those who hold higher positions would have to be increased. For example, if the amount of money that the minimum wage dishwasher or table busser in a restaurant increased, then the chef and manager would need to be paid accordingly. If the minimum wage were to increase, it would be detrimental to both small and large businesses.

The minimum wage debate has been a hot topic over the past year, especially with the Presidential Election. This is a divisive topic that people rarely agree upon. There are essentially two sides you can take when it comes to this argument. Either people are for minimum wage or are against raising, or even having, a minimum wage. Proponents of the minimum wage are typically politicians who are lobbying for the vote of the people who feel that a minimum wage is critical to their wellbeing, and those who sympathize with people who earn “minimum wage”. Minimum wage is destroying America’s free market economy and someone needs to take action and find a better solution to this problem. Without anyone acting on this problem now, it can potentially be worse in the long run. Raising the minimum wage in the United States will do more harm than good to society because of the long-term effects.

An increase in minimum wage will have a different outcome for each business. To cover the higher wages and payroll costs, businesses must reduce employment or find a way to adjust to the higher costs. History has shown that implementations of new techniques can take effect, such as raising the prices of the distributed products. By raising the prices slightly, a company can take the additional revenue to apply towards the payroll account. Some businesses already have a large profit margin; consequently, they can adjust their budgets to arrange the revenue to cover the increase in the payroll accounts without raising the prices of the products (Wicks- Lim). This adjustment would not affect the workers; however, the employer would take the deficit in the revenue. Unfortunately, some businesses must eliminate jobs and possibly turn to technological advances to avoid the increase in wages (Sherk). The funds saved from the turnover would then pay for the employees left on the payroll. Businesses should never see a drastic decline in revenue from an increase in minimum wage, so overall a business could argue they can still prosper, if the minimum wage rose to $15.

The people that would take the biggest blow are the stake holders of large corporate companies that would have to raise the cost of employee wages if the minimum wage were to be raised. If a corporation with 10,000 employees working forty hours a week had to give their employees a fifty cent raise, they would lose over ten million dollars a year. Now I do not know about you, but if I had a company and I was about to lose ten million dollars a year I would be trying to compensate for it. Wilson (1999), states that if the federal minimum wage were to be raised companies might respond in such a way that may cost employees their fringe benefits. They would lose hours, medical benefits, yearly bonuses and merit based raises.

And while these effects are more on the scale of large corporations, small businesses may yet also feel the effects of the minimum wage. With even fewer resources to rely on, a small business would have a harder time progressing and growing; a small business has only a small selection of workers who may be indispensable, so downsizing may be out of the picture, forcing them to cut back expenses, thus stunting their growth and leaving room for large corporations to take over the local industries. This, of course, presents another problem in today’s society concerning capitalism and a free market economy – when a small business grows weak financially; larger corporations have an opportunity to sweep in and seize hold of the local market for specific goods and services, drawing money out of that town and into the pockets of greedy companies. For example, a local burger joint or mom & pop store could be crippled by a turn of the economy, causing them to raise prices and cut back on expenses. However, the local McDonalds or Walmart would only be affected by a relatively smaller margin, spearheading these corporations into the

Increasing the minimum wage to $15 per hour will cause more people to be laid off. Labor economist Joseph Sabia of San Diego State University went against the raise of the minimum wage because businesses will start cutting low-skilled workers and their decrease in income will result in poverty. Increase in minimum

My chosen firm is Odoba Mexican Grill and it produces quality meals that aggressive prices. In other words, the aim of the restaurant is to offer wide variety of competitively priced meal choices. Price and quality are two important factors in the success of any food business. If prices go up too much or quality decreased significantly, the demand will go down. But another very important factor is income. With changes in income, demand can see a negative change. If income comes down for regular customers, they will cut down the quantity demanded. This means that regular customers who were frequently going for meals at the restaurant might choose to go less often or order smaller meals or low priced alternatives.

Beside the increase in cost to businesses and customers, other people can potentially be hurt by this policy. By increasing the wage, small businesses will suffer a higher cost that can lead to cutting jobs, stalling new hire or even shutting down. On the other hand, the economic plight of these minimum wage workers should also be considered. Therefore, the $15 plan would produce unpredictable consequences, while not doing anything would doom minimum wage workers to live in in poverty and to consume public resources.

Minimum wage is currently at 7.25 (Furman) if minimum wage goes up so does everything else, so it wouldn’t make a difference. Food cost will go up, such as milk sugar, and everything else we use on a daily basis. Not only that but, It could cause a store to shut down due to having to pay employees twice as much as before. Labor cost would be high and unreasonable. If the prices of items or product being sold doesn’t go up.

According to a study done by Perdue University, “…paying fast-food restaurant employees $15 an hour could lead to higher prices. Prices at those businesses could increase by an estimated 4.3%, according to the report” (Wihbey, Effects of raising the minimum wage: Research and critical lessons”). With a higher minimum wage, businesses must then pay their employees more, and to pay these additional expenses; they are coerced to charge more for their products, which impacts everybody, making it more difficult for people to provide for their families. The Cato Institute stated, “According to a review of more than 20 minimum wage studies observing price effects found that a 10 percent increase in the US minimum wage raises food prices by up to 4 percent” (Wilson, “Four Reasons Not to Raise the Minimum Wage”). If the federal minimum wage increases from $7.25 per hour to $15 per hour, it is being increased by slightly more than 206%, which, according to this study, could lead to almost an 84% growth in food prices. According to another study on the effects of an increase in the federal minimum wage on consumer prices in the Reason magazine, “Raising the minimum wage to $15 could increase the cost of food by 43%” (47: 10). After a significant increase in the federal minimum wage, the employees who did not lose their jobs would then be receiving

The federal minimum wage would progressively increase over a matter of years if passed, and in the first year, with an increase from $7.25 to $8.10, nearly 13 million directly and indirectly affected workers would see higher wages. This number would rise to about 20 million workers with the second

On the employees side if they get the $15 dollar and hour they say it will help them get out of poverty level living and wont need government assistant to live their day-to-day life and letting the government assistance go to some families that really need it. In some cases like McDonalds workers they want to become a union so they can officially have a voice when it comes to getting better wages and other benefits. On the employer side of the story, they say it will hurt business and the customers in the long run. If restaurants end up having to pay their employees the asking amount of $15 and hour the some of that cost to pay their employees the increased wages will go to the customer. The customer will have to pay for those wages by paying higher prices for the food at these restaurants. There will also be less hiring, especially entry-level and low skilled employees. The International Franchise Association say that if the workers get their $15 wage that it can wipe out the profit margin for many companies. There is also the fear that some franchises wont be able to pay the employees the $15 an hour and make any money for them selves that they will go out of business. So now instead of have lets say twenty employees working and $8 and hour now the business has to close because it could not keep up with the wages change and not making a profited now you

As for small businesses being harmed by an increase in minimum wage, Batra proves that a rise in minimum wage, as long as it is not faster than the rise in prices, will not adversely affect the businesses’ profits. He says that a business’s profit equals the revenue, less wage costs and all other costs. Batra offers an example with a popular fast-food franchise:

If we look at the fast food industry today there is room for success. Based on RNCOS’ new US Fast Food Market Outlook 2010, fast food industry growth rate is strong. Especially, hamburger sales growth is reported at the healthy rate of 4.6% in 2008. The market is expected to grow to cross the $170 billion marks by 2010.It is believed that due to the economic meltdown, fast food industry is benefiting from people being more prices conscious. People who were enjoying nice means at fancier restaurants are now turning their choice of means to more economical ways.