It’s not easy to explain viable alternatives to sharply raising the minimum wage. Anything to the contrary makes a person sound like a scrooge. Who doesn’t want to see people earn a higher wage, right?
But what if you knew, with absolute certainty, that a minimum wage increase from the New York state minimum of $8.75 (prior to Dec. 31, 2015) to the new $15 per hour wage—which represents a 71.5 percent jump—would hurt the working class because small business owners and large companies would create fewer opportunities than they do now? And who has the most to benefit?
Some politicians are big winners because they acquiesce to big labor in exchange for votes and financial support for campaign bids for re-election or higher seats. This undermines public service because it only benefits certain people while others are left outside in the cold.
The politicians that support the increase know that by unilaterally raising the minimum wage to $15 per hour for New York fast-food workers, four things will happen: [[ADD BULLETS]]
The price of food at those restaurants will go up.
Hours will be cut, with fewer employees on each shift.
Job automation will rapidly accelerate above the norm because it will be more cost effective to invest in machines than people at the substantially higher wage level for low-skilled workers without any expectation of increased productivity.
Politicians will proclaim they care about the working poor.
Elected officials also know that skilled workers soon will begin competing with entry-level restaurant employees—including teenage kids looking for their first jobs—because those positions will be more financially attractive. Other businesses on tight margins will have to cut back, too, as they are forced to compete for workers with higher wages.
As an alternative to a $15 minimum wage, Warren Buffet recommended expanding the earned income tax credit, which is clearer and puts more money into the pockets of people working for low wages without adversely impacting the already fragile small business economic environment. An earned income tax credit combined with a modest minimum wage increase to $10 would be a better compromise that market conditions can bear (e.g., labor and small businesses, et al). In tandem with this alternative increase, transform the educational system to equip students with real life skills so that they can aspire to be something greater than a cashier or burger flipper at fast-food restaurants.
Hardworking people in the urban community and rural areas of our society are the precious stones and building blocks of our economy and yearn for better opportunities in life as their skills are honed. The sharp rise in the minimum wage may increase salaries for a few but steeply decrease opportunities for many others. While employees that are not in a labor union and taxpayers suffer the brunt of the financial burden when fewer jobs are available, New Yorkers who are out of work will become more dependent on politicians who repeatedly do not deliver material results—all of which will disproportionately impact the urban community negatively.
We are dangerously flirting with a rapidly compounding inflationary market. How? Undoubtedly, a 71.5 percent increase in the hourly wage without requiring any additional education or skills coupled with an impending inflationary market by the Federal Reserve will distort labor markets and drive the price of goods and services even higher. One stark reality is that there are no quick fixes to the complexity of interconnected socio-economic issues that have evolved over time, and its effects are compounded by inadequate policies described as the urban panacea.
Whether you are fresh out of college seeking a job in your field, an upwardly mobile hipster poised for a bigger break or a seasoned worker raising a family, we all need a vibrant job market that provides opportunities ranging from apprentice to expert level to employ skilled blue- and white-collar workers seeking gainful employment.
John Burnett is a financial services executive with over 20 years of experience at some of the world’s top financial services and business information companies. He is an urban financial freedom fighter and is based in Harlem, N.Y. Follow him on Twitter @IamJohnBurnett and Facebook/IamJohnBurnett.
