2015 will be remembered as the year that 14 cities and states approved a minimum wage long considered unthinkable: A whopping $15 an hour! In many cases, there's a four-year phase-in allowing businesses to adjust to the newer higher wage.
But in 2016, expect the genie to really come out of the bottle. Legislative or ballot proposals to raise the minimum wage in another dozen or so locations are on tap for the new year, according to the National Employment Law Project.
We all know the minimum wage is a hotly contested issue on the political front. But there is a way to view it through a non-political prism...
Where do you stand on the minimum wage debate?
Right now, we have great laboratory under way with some states raising the minimum wage and others keeping their hands off it. That dichotomy gives us the opportunity to see how it will play out in the real world. Will it kill jobs as the GOP contends or will it raise the standard of living as the Democrats hope?
As far as being a job killer, it's always helpful to look back to historical precedent -- in this case to a time when agriculture dominated the American lifestyle. Farms used to employ 97% of all Americans. When mechanization of farms came about, there were fears that permanent and severe massive unemployment would result. But we all know how that played out! Today, farm employment is a fraction of 1% of the U.S. workforce and farms produce more food than ever. The jobs simply came from other places in an increasingly less agrarian society. That's likely to happen again.
Now let's view the minimum wage debate through a strictly economic prism. What happens if you take a low-wage business, like fast food, and turn it into a high-wage business? The operator of that business has to automate functions and then hire a smaller staff that makes more money. Look at the European countries where there already are higher wage rates. Their fast food restaurants have automated everything from ordering to paying. Even the cooking in the kitchen is done by robotics in many cases.
So when you raise wage rates in a labor-intensive business, you ultimately reduce how much labor it takes to run that business. Because machines take the place of workers. That's why they call economics "the dismal science."
Maybe the idea of not coming to a national consensus on the minimum wage and letting the living labs of the states do what they may is the way to go. We'll see if we change jobs or if we kill them. Do states that hold down wages end up with far more employment than the others? We'll find out.
Education may be the ultimate answer
The reality is you can't support a family on the federal minimum wage of $7.25. But is the solution raising the wage? Maybe the ultimate solution is education so we give people more ability to provide greater economic value for their hours worked.
The voters in the states with ballot initiatives in 2016 will ultimately decide whatever they want on this issue. But how about you?
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