In the state of Arkansas this past November on the voting ballot was the choice for citizens to vote for the raising of the minimum wage to $11.00/hr over the next three years. At first glance, someone might think that this is a very good change but when taking a deeper look into the subject, it will reveal a lot of consequences that will cause a lot of trouble over time. Cost of living is going to rise, businesses will be less likely to hire when needed, unemployment numbers will rise and simple things such as a hamburger at McDonalds will go up.
Right now the minimum wage in the southern United States averages around $8.00/hr.(LaborLawCenter) This is the reason why housing is so much cheaper in the south than living in California where the minimum wage is $12.00 or New York where it is $11.00. Now imagine this, Arkansas having the same minimum wage as New York. There are four major entities that affect cost of living; housing, taxes, healthcare, food.
The average rent for a 1,000 sq.ft. apartment is roughly $3500 where the same size apartment will run you around $800 in Arkansas (RentCafe.com). Housing cost 379% more in New York when compared to Arkansas. Health insurance rates will skyrocket as well. The average health insurance for Arkansas is right around $2800 (Valuepenguin.com) with New York coming in over double the price with at $6800.(Empirecenter.org) When businesses raise minimum wage, theyre also having to give raises to the employees who make more than minimum wage.
Who wants to go to a four year school, spend thousands of dollars for classes and then come out making $15/hr for a nursing job when they could go flip burgers at the local burger joint for $11 and not be liable for someone’s life? When employees get raises, then the cost of goods rise as well affecting the overall cost of living. Along with cost of living going up, there will be a rise in the unemployment rate as well. It is really simple economics when it comes to this aspect of raising the minimum wage. Non-skilled labor jobs are easy to come by. An employer will pay X amount to this position.
When the wage gets over that threshold, the employer will be less likely to hire for this position. What this equals is that position going away altogether instead of being paid a lower wage. Now that job along with the services it provided are gone. Economist Richard Vedder quotes If the price of something rises, people buy less of it including labor. Thus governmental interferences such as minimum-wage laws lower the quantity of labor demanded. What he is saying is basically clarifying what is written above. In February 2017, Wendys CEO Bob Wright states there is a 4% increase in wages across the board in his company.
First, they could cut margins, but with an 8% margin, that’s unlikely.
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