An Update on How the Minimum Wage Hurts Workers

It has been a while since I last blogged.  A lot has happened recently that is worth commenting on.  But, this post will focus on the correctness of my previous postings that the minimum wage hurts workers.

According to Andy Puzder, the CEO of CKE Restaurants – parent company of Carl’s Jr. and Hardee’s, in locations across the country where the minimum wage has been increased, his company’s franchisees are closing shops after their leases expire.  “When the minimum wage increases, there are two things you can do,” he said. “One is you can reduce the amount of labor that you use or you can increase your prices.”  Unfortunately, minimum wage increases do reduce jobs; as in the case above sometimes all jobs are eliminated.

But, Puzder is also correct about the causation between minimum wage increases and price increases.  Many businesses in SeaTac, Washington, where the local minimum wage has recently been increased to $15, have imposed an 8.25 percent “Living Wage Surcharge” on goods and services to ease the increased cost of labor on business.

However, the bulk of the negative consequences of the $15 minimum wage in SeaTac have fallen on local workers.  Those making the higher wage have reported losing their 401ks, paid holidays and paid vacations, free food, free parking, and overtime hours.  In many cases, these benefits plus the lower state minimum wage added more value to workers’ earnings than the new $15 wage.

In the final analysis, the minimum wage does not enrich the working class or stimulate the economy like its proponents claim.  Quite the opposite is true.  The money involved to pay for the increased labor costs is not free.  It comes from consumers in the form of higher prices and it comes from workers in the form of lost benefits and lost jobs.