Written by William R. Rusk, GEI Associate
I'm sorry but you will never be able to support your family working at McDonald's... even with a substantial minimum wage increase.
Beginning late last year, fast-food employees organized by local social rights operations and the SEIU began coordinated strikes across the country demanding that the minimum wage be increased to $15/hour. The protests were based largely on employee frustration, not being able to support a family or live by themselves, they directed their rage at their employers.
Jobs in fast- food have typically been occupied by teenagers attending, or those that recently graduated from high school and still live with their parents. However, a paradigm shift seems to have occurred and many have begun to believe that their fast-food job should provide the same pay and benefits as most middle-class careers. While many of us would love to see our fellow Americans earn more money and be able to comfortably support a family, raising the minimum wage is not the best option to achieve these goals and will most likely produce the opposite result.
Fuel to the Fire
While the media has given enormous attention to the plight of the fast-food employee, the Community Organizer-in-Chief Barack Obama stoked the frustration by signing an executive order in early 2014 that raises the minimum wage of federal employees from $7.25 to $10.10. While largely meaningless since the wage increase only applies to new contracts and most federal contract employees make well above the minimum wage, the executive order was given the media's limelight and kept the minimum wage debate raging. According to a GALLUP poll from early 2013, in the US 71% support a minimum wage increase. While many, including the President, support this feel-good legislation, its effects may not be what they had in mind.
A February 2014 report by the Congressional Budget Office examined two possible scenarios, raising the minimum wage to $10.10 (which most democrats support) and an increase to $9.00 (a likely compromise). Interestingly enough, the CBO found that both options would most likely increase unemployment. The $9.00 option could have a slight increase in employment to - 200,000 workers. The $10.10 option could have a slight decrease in employment to -1,000,000 workers or roughly 0.6 percent. Now, imagine the $15/hour minimum wage increase that the fast-food workers are pushing for, we would likely see whole percentage point increases to unemployment under that scenario. The CBO study echoes the economic principal that minimum wage laws discriminate against low-skill workers, when your position is no longer economically viable, your position no longer exists. The study also found that while the increase in wages may raise the quality of life for some, it would actually lower the quality of life for others since the wage increase would be passed down to consumers through increased prices.
Rise of the Machines
As employment in the US is becoming more costly for businesses, due largely to the Affordable Care Act and the threat of minimum wage increases, employers are looking for substitutes to employees. Namely robots and other technologies that will fulfill the responsibilities of former employees for less money. While this may sound futurist, the technology is already here (and here), it has just not been implemented yet because it is currently more cost effective to have humans do the work. However, as employee costs rise, so will the automation. Already, Panera has announced they are rolling out technology that will allow customers to order from digital kiosks or their mobile phone instead of ordering from a person. Applebee's and Chili's are also currently in the process of replacing their waiters with tablets.
Speaking from personal experience, I know that fast food jobs are stressful, unrewarding, as well as humiliating. That is what motivated me to find a better job as soon as possible. These positions are not careers, they are stepping stones to a career. There are valuable skills that may be attained while working these jobs such as customer service, cash handling, food preparation, teamwork, and the ability to work under stress. Never sell yourself short and think that you cannot rise above a fast food job. Gain some confidence by hammering out a proper resume, work on interview skills, request a letter of recommendation from a manager or franchise owner, and take some college courses at a community college (which there is plenty of financial aid available for). These social justice operations and the SEIU are feeding into a strong current of frustration amongst fast food employees, but instead of encouraging them to find a better job, they imply that they settle where they are and simply demand more pay.
The Debate Continues
As 34 state legislatures are considering minimum wage increases during 2014, the debate is likely to continue for the foreseeable future. As a majority of Americans favor minimum wage increases, union and social rights operations will continue their pandering to the frustrated. While Americans are inherently generous and would like to see their fellow countrymen succeed, we should not let the feel-good legislation of 2014 become the regret of the future as unemployment increases and prices rise hurting the very people we wanted to assist.
U.S. fast-food workers protest, demand a 'living wage' (Atossa Araxia Abrahamian, Reuters, 29 August 2013)
Obama to sign executive order raising minimum wage for federal contractors (FoxNews.com, 28 January 2014)
In U.S., 71% Back Raising Minimum Wage (Lydia Saad, GALLUP Politics, 6 March 2013)
The Effects of a Minimum-Wage Increase on Employment and Family Income (CongressionalBudget Office, 18 February 2014)
ACA's Cost Impact: Employer-Sponsored Health Plans (International Foundation of Employee Benefit Plans, 2013)
Panera goes to high-tech ordering (Bruce Horowitz, USA TODAY, 13 May 2014)
Of Course Applebee's Is Going to Replace Waiters With Tablets (Will Oremus, Slate, 3 December 2013)
State Minimum Wages | 2014 Minimum Wage by State (National Conference of State Legislatures, 14 May 2014)