In the United States of America, there appears to be a movement to raise the federal minimum wage from $7.25 to $15. In fact, the House has passed a bill that will raise the minimum wage to $15 by 2025. This seems to be a perfect idea to equalize income for underrepresented minorities and increase spending among consumers. However, an increase in the minimum wage would also negatively impact low-skilled workers and force companies to turn to automation.
When faced with statistics, raising the minimum wage appears to be just a sweet nothing and empty promise from politicians looking to expand their campaign. Advocates for increasing the minimum wage broadcast themselves as a savior for the low-skilled workers of America. Nonetheless, this is far from the truth.
An analysis of the potential effects of a $15 minimum wage in Montgomery County, Maryland concluded that one of every three low-wage jobs would disappear, and low-wage workers’ incomes would decrease by $360 million each year. Increasing the minimum wage hurts low-skilled workers instead of benefiting them. When small businesses, which employ almost half of America, have to pay their employees extra, they are unable to cover that cost without jacking up prices. Passing the flag to consumers won’t lead to a positive reaction either as consumers will turn to a cheaper source either from out of the country or from large companies relying on automation. Raising the minimum wage also entices companies to turn to automation rather than human workers, decreasing job vacancies throughout the nation. An article from Forbes magazine titled “New Study Suggests Minimum Wage Leads To Automation Of Low-Skill Workers” states “Economists Grace Lordan and David Neumark find that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers, and increases the likelihood that low-skilled workers in automatable jobs become unemployed.”
Although raising the minimum wage does have a couple upsides, it seems that the positives do not outweigh the negatives. According to computer scientist Kai Fu Lee, 40% of all jobs in the United States are threatened by automation. Raising the minimum wage will only make this trend worse.