Minimum Wage Hike: Increasing Mandatory Minimum Will Only Make The Economy Worse [Opinion]

A new minimum wage hike is expected to hit New York as it did in California, ramping the living wage to $15 an hour by 2019. Many who put this increase into effect might be feeling like they’ve helped the general population in an increasingly bad economy, but they really didn’t.

Raising the mandatory minimum doesn’t really solve anything. It’s just going to create more problems.

The popular conception is that if you pay your employees more, they’ll be able to afford more and morale will improve overall. This might work for some retailers, which make it a regular practice to reduce costs by keeping lower levels near poverty, but some businesses could easily be seeing losses large enough to put them out of business.

While Walmart has been known to keep their employees fighting for a living wage as the higher-ups rake in the wealth, others like local pizzerias and coffee shops may have been simply making just enough to cover paying employees anything at all. England’s Caffe Nero is one such employer. The minimum wage hike which went into effect on April 1 (not a prank) forced the restaurant to cut their generosity toward employees.

Whoever worked for Caffe Nero in the past was able to order whatever they wanted off the menu and the company would cover it. Yes, they enjoyed a free lunch because the business was doing well enough. After the minimum wage hike, they decided to significantly reduce what employees could order on their lunch breaks for free. The staff has gone on record to say how the minimum wage hike and its effect on business in turn affects them.

“Before the National Living Wage increase we were allowed to order whatever we wanted off the menu. Now we’re only allowed to order a plain margherita or a plain cheese and tomato pasta. Any additional toppings we have to pay for at cost price. The staff don’t seem to be very happy about it as it was one of the benefits of working there.”

This is how the increase in wages works. Every employee is guaranteed a raise at the bottom level. Multiply the difference by the number of employees and you’ll notice a significant increase in the bottom line costs. Many businesses claim they can’t afford the new bottom line, and have two options at that point. They can either cut hours to offset the raise and have the employees work on skeleton crews, or they can raise the prices on merchandise and services. If the company has to resort to this, they will end up with lower morale among their employees, or customers who won’t be back because of the sudden price hike.

Some major retailers will use this as an excuse to cut hours anyway, just to keep their hefty profit margin even though the minimum wage hike doesn’t really hurt their business.

Cutting off benefits to employees also creates a ripple effect, because it forces them to cut their own spending everywhere else, and they’re less likely to spend it where they work. The minimum wage hike ends up handicapping employees due to actually earning less to keep the company in business, and then the businesses around them also suffer from a loss in profits while paying their own employees more. In the case of New York’s Dover Caterers, they are no longer able to hire as many students for the summer.

The fault really lies with the major retailers, which are actually making a healthy enough profit margin to afford the new minimum wage without making serious adjustments, and yet they make sacrifices anyway. The rich keep their wealth and the poor learn to live with poverty level income.

In a fair world, the raise in minimum wage would be a positive change, but it doesn’t work that way. Just check the shelves at your grocery store, and if you notice the prices on your favorite products have gone up, ask yourself if the minimum wage hike was worth it.

[Image via Rrraum/]

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