10 Things That Would Happen if Minimum Wage
Went to $15 Everywhere 10. The Rise of the Machines Forget Terminator. Forget The Matrix. The real cause of the machine revolution lies
not in military programs, but in the battle for a higher minimum wage. According to The Economist, there’s only
one likely outcome to a yuge minimum wage hike: mass automation. Right now, machines and computers are capable
of doing a heck of a lot that low-skilled humans can, such as driving trucks and manning
checkouts. The reason that they don’t isn’t due to
some fancy-pants robot-workers’ union, but because they simply cost too much. It’s way more cost-effective for an employer
to keep you working at the checkout for $7.50 an hour than it is for them to buy a machine
to do your job, so they don’t. But when that $15 wage hike comes in, suddenly
the robots are looking a lot more attractive. The outcome? Jobs will disappear faster than you can say
“Skynet.” Nationally, millions would be out of work. Globally, billions. That would mean completely restructuring our
economies to deal with permanent mass-unemployment; a shift which wouldn’t come easy. 9. The Poor Would Still be Poor It’s important to note that robots still
suck at certain jobs. Cleaning, for example, is better being done
by humans. Mass-automation wouldn’t really affect such
sectors. So that means a minimum wage hike would still
lift some out of poverty, right? Sure. But far, far fewer than you’d think. Most supporters of the $15 minimum want to
reduce poverty. But the minimum wage rarely affects those
who are truly poor. Only 12.7% of US minimum wage workers come
from poor households. Just under half are secondary-income earners
from households with earnings three times higher than the poverty line. In other words, they’re teenagers starting
their first job, or parents who took time out for raising kids and now want a bit of
part-time work to fill the empty hours. The result would be a boost to these people’s
finances, for sure. But the vast majority of American poor either
already make $15 but don’t get enough hours, or simply don’t work at all. A mass-applied $15 minimum wouldn’t affect
this cohort one bit. 8. Mass Migration In the 1980s, well-meaning legislators accidentally
screwed-over Puerto Rico. As a US Territory, the island became subject
to the US Minimum Wage. Hooray for Puerto Rico, huh? Not so fast. The knock-on effect of this wage increase
was to drive a huge chunk of the island’s residents to migrate to mainland USA. This sounds counter-intuitive, but it makes
perfect sense. Puerto Rico is poor. There was simply no way employers could afford
the mainland minimum wage. With automation in 1983 being a pipedream,
they simply laid off workers and sent unemployment skyrocketing. Something similar would happen with a global
minimum wage. Rich cities and countries that could afford
the $15 hit would suddenly become Meccas for those from poor areas which couldn’t afford
it. The jobless poor would flood in from territories
and rural areas that couldn’t pay, leading to perhaps the greatest wave of human migration
in history. And as we all know, mass-migration doesn’t
always go completely smoothly… 7. Rampant Xenophobia During the Great Depression, hundreds of thousands
of Americans were forced to leave Dustbowl States to look for work. Oklahoma alone lost nearly half a million
of its population to more-prosperous states like California. How did the residents of richer states react
to this sudden influx of poor, depressed and unemployed people? They freakin’ hated their guts. Okies were the subject of extreme discrimination
from locals who thought they were stealing jobs, bringing crime, undercutting wages and
just generally stinking up Sunny California with their Okie ways. Never mind that most of the Okies were family
folk who just wanted to do some honest work and contribute to California, they were still
hugely unpopular. It’s not hard to imagine something similar
happening if a $15 minimum wage drove people from poor, rural areas into rich, urban ones. On a national scale, it would be uncomfortable. If it was global, then throw in racism and
culture clash and you’re potentially sitting on a powder keg. 6. Poor Countries Would Become Poorer Everyone reading this can probably agree that
paying Bangladeshi workers $0.50 per hour to toil in a sweatshop is morally ugly. Unfortunately, it’s also the way the world
works. Poor countries like Bangladesh, Ethiopia and
Haiti are chronically in need of investment. To ensure companies want to set up shop there,
they have to offer something the West can’t. Sadly, that ‘something’ is extremely low-wage
employees. Create a world where everyone from a trucker
in Arizona to a garment-maker in Dhaka is worth $15 an hour, and you destroy the only
competitive advantage these countries have. For a company in the US, it suddenly makes
no sense at all for them to set up a factory in Asia when it costs the same as setting
one up in America. So they won’t. Unless poor countries sacrifice something
else in return for investment, that investment will simply dry up. Bangladeshi jobs will vanish, money will disappear,
and poor countries will get even poorer. 5. The End of Outsourcing On the other hand, this would mean the end
of outsourcing; a practice generally considered to be so mercenary it probably counts as one
of the 7 Deadly Sins. While this is extremely bad news for those
living in poorer countries, it could be pretty good for those living elsewhere. Right now, a lot of jobs that used to be done
by Americans are being done abroad for a fraction of the cost. Take away those cost incentives to move abroad,
and those jobs will probably stay in America (provided the government did other stuff like
cut corporation tax). For those industries that can’t be automated,
it could result in a glut of work available at home. It would be the same thing both Trump and
Bernie Sanders like to talk about: American jobs for American workers. The downside is there are other ways countries
could attract multinationals even with a global $15 minimum wage, such as low corporation
tax, an unregulated market or removing certain labor restrictions. In practice, then, a global minimum wage of
$15 might not end outsourcing. Instead it might trigger a race to the bottom
in an entirely different area. 4. A Gigantic Small Business Crash There’s a reason campaigns like Fight for
$15 stir so much moral fury. The idea that a multi-billion-dollar empire
like Walmart can get away with paying its employees $7.20 per hour makes any reasonable
person’s blood boil. The reality is that plenty of minimum wage
employees aren’t slaving away in Walmart. They’re working for small businesses. And asking those small businesses to double
their employees’ wages is like asking them to start handing out blocks of gold to all
of their customers. Around a third of minimum wage employees are
working at businesses that employ fewer than 50 people. Force a $15 minimum on these places, and they’re
gonna go under or lay off staff or (more likely) both. That means a collapse of small businesses
across the board, something that’s not exactly thrilling for stuff like innovation, the economy,
or just having a few more choices of coffee place beyond Starbucks. Most of us value small businesses and independent
Mom-and-Pop stores. We also value the idea of workers being paid
a good minimum wage. Sadly, these two things can often be mutually-exclusive. 3. The Rise of Freelance Contract Work One of the big flaws with the minimum wage
is that there are quite a few ways around it. Most of you reading this probably work in
an industry that utilizes one or more of them. For example, your place might take on unpaid
interns over summer. Or maybe those looking for a promotion can
take part in a scheme that temporarily increases their responsibilities while not affecting
their pay scale. In many industries, the ‘get around’ comes
from freelance contract work. This is especially prevalent in the world
of online writing which – surprise! – we happen to know a great deal about. The basic set-up is that the website will
pay you per article, not per hour worked. If you’re a dashingly-handsome internet-writer
with chiselled abs this isn’t a problem, as you’re capable of writing a $15 article
in way under an hour. But for someone without those skills or looks…
well, then you got a problem. In a world where the $15 is everywhere, plenty
of companies are gonna avail themselves of freelance contracts. This means people who aren’t suited to them
languishing away, taking hours and hours and hours to complete a task which will net them
only paltry sums. So how about we get rid of these contracts
altogether? Well, then you’re stuck with plenty of businesses
going bust… and all those same workers now making nothing at all. 2. An Explosion of Spending By now, we suspect some Fight for $15 fans
are more than a little upset with the direction this article has taken. Hey, thems the breaks. We just go where our research leads us. And for this entry, it has led us to a potential
light at the end of this dark and mold-infested tunnel. There’s a chance a $15 minimum could spark
an economy-reviving spending spree. This comes courtesy of Bloomberg, an outfit
not exactly known for its leftish politics. The argument is pretty straightforward. A capitalist economy relies upon workers using
their wages to buy stuff they want but don’t really need. This is the engine that drives growth. Whisk away that extra part of their paycheck
marked ‘conspicuous consumption’ and the economy falters. Conversely, inflate that part wildly with
a $15 minimum wage, and sit back and watch as the economy goes into overdrive. The theory is that people who earn the extra
money would spend and spend like lunatics. Goods would be flying off shelves. Vacations would be booked en masse. Services would be purchased, money would go
flying through the economy, and everyone would wind up being a winner. It could be a boom to rival the 2008 bust,
the sort of massive boost we haven’t seen in ages. 1. Everything or Nothing At the end of all that, we have a confession
to make. We don’t know what would happen if the minimum
wage went to $15 everywhere. That’s not us being uninformed: literally
no-one knows. While there have been plenty of studies done
on minimum wage hikes, there has never been one done on a hike as enormous as the $15
one would be. It simply hasn’t happened before over a
large enough area, or in enough places, for anyone to draw any firm conclusions. As a result, it’s easy to find respected
economics writers claiming that a national $15 minimum would be the best thing ever;
just as it’s easy to find respected writers claiming that such a hike would trigger the
apocalypse. What we’ve done above is drawn on what a
plurality of economists seem to think, and what theories seem to suggest, to try and
draw conclusions. The reality is, no-one knows for sure what
would happen applying the $15 minimum on a national scale, let alone an international
one. The only certainty is that the effect would
be enormous, and possibly world-changing. Whether for the better or the worse is something
we’d simply have to wait to find out.
