Proposals to raise the minimum wage to as high as $15 may have a chilling effect, especially for those who are beginning their careers and students seeking part-time jobs, according to David McClough, associate professor of economics at Ohio Northern.
“As a higher wage is imposed, business owners in areas such as fast food and retail will assess their ability to hire workers. Firms will have to determine whether the benefit of an employee justifies the cost. Service businesses may determine to hire fewer workers and rely more on automation,” said McClough.
“While the higher wage may be well-intentioned, not all firms can absorb the increased cost burden. Including taxes and benefits, employers pay workers about 40 percent more than the wage. So, if the minimum wage is raised to $14, you have to get nearly $19.63 worth of value just to cover the cost associated with the employee. Not all jobs are worth $20 an hour to all firms.”
As wages have risen, employers have been scaling back on workers, McClough points out, and that trend keeps employment out of the reach of young workers.
“There is a reason we are seeing more self-service checkout lines, and they no longer walk your groceries out to your car at the grocery store or pump your gas,” McClough said. “This is just business-owners responding to the marketplace.”
“As a result, many young people are not realizing the benefits of a first-time job that will last beyond their careers, such as teamwork, customer service and working with others.”
According to McClough, the debate focuses on the real interpretation of the role of minimum wage.
“What it comes down to is if it is a living wage or a wage for individuals to get first-time jobs and begin their careers or supplement their primary salaries. If it is viewed as a living wage, then when raised it will necessarily eliminate many entry-level jobs – not just existing jobs, but jobs that might have been,” he said.
