Why $50 an Hour Minimum Wage Sounds Great, but Would Be a Disaster for Employees
Written by
Gina Hagler
Edited by
Cynthia Measom
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Recently, California Rep. Barbara Lee doubled down on her proposal to raise the federal minimum wage to a whopping $50 per hour. California’s state minimum wage is $16 per hour, which happens to be the second highest in the United States. For reference, the current federal minimum wage is $7.25 per hour.
The proposed raise would entail that virtually any minimum-wage employee working a 40-hour week would make $104,000 a year before taxes. In other words, anyone who works for an organization whose “annual gross volume of sales or business done” is at least $500,000 (such as Starbucks, McDonald’s, Target, Barnes & Noble, CVS and Walgreens) and makes minimum wage would earn a six-figure salary.
While this might sound great in a vacuum, here’s why it would ultimately be a disaster for employees.
Jobs Opportunities Would Decrease
For starters, fewer people would have jobs, increasing the total number of unemployed. By requiring that employees get paid substantially more money, companies won’t hire as many workers because they simply won’t be able to afford to do so.
Current Employees Could Lose Their Jobs
Tangentially, established employees will lose their jobs, increasing the total number of jobless. By being forced to be much more selective with their labor force, some employees will lose out to competition that they wouldn’t have before. Thus, less educated or less experienced workers would have a harder time acquiring what they need to get hired. Fewer opportunities in the short term would lead to fewer opportunities down the road.
Automated Processes Would Likely Increase
Additionally, employers might also be incentivized to invest in automation at a faster rate to account for the drastic change in the cost-effectiveness of their current business model.
Employers Might Cut Down on Employee Perks
Employers will look for other ways to cut costs, which could negatively affect the workforce. For instance, they might stop offering tuition reimbursement or employee cafeterias.
The Takeaway
Much of the controversy over raising the federal minimum wage (or minimum wages in general) comes down to the idea of a living wage versus a starting wage. Those on the former side, who support increasing the minimum wage, want it to continuously account for inflation, allowing full-time workers to afford the basics. The opposition, who want it to remain the same, view it as the level that people are supposed to enter before moving up to positions with higher pay.
At the end of the day, it isn’t just the employees who will suffer from a $50-an-hour minimum wage. Once the hike occurs in response to higher labor costs, consumers will be hard-pressed to pay the proportionately exorbitant price for the cup of coffee or burger and fries that they’ve been accustomed to all this time. It’s hard to imagine that a $50-an-hour minimum wage could be anything other than a disaster.
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