The Limits of Minimum Wage: Why $100 Per Hour Is Unfeasible and Counterproductive

Often, discussions around increasing the minimum wage focus on the potential for rapid economic improvement. However, the reality is more complex, often leading to inflationary pressures that offset any gains. In this article, we explore why setting the minimum wage at $100 per hour would be unfeasible and counterproductive.

Understanding the Minimum Wage and Cost of Living

Minimum wage has a fundamental role in ensuring a basic standard of living for workers. However, increasing it to $100 per hour would create significant challenges. The cost of living is one of the key factors limiting wage increases. Even if wages rise, inflation and cost of living adjustments quickly negate these gains.

The Impact on Businesses and Employment

Most minimum wage establishments, such as restaurants, grocery stores, and fast-food chains, operate on very narrow profit margins. These businesses rely heavily on volume sales to maintain their operations. An increase in the minimum wage to $100 per hour would force many of these establishments to shut down, leaving employees with no income at all.

Case Study: McDonald's

For instance, let's take a McDonald's franchise. These operations often have overhead costs that are difficult to shift. Here's a breakdown of the economics:

Operational Costs: With 12 employees working 8-hour shifts daily, seven days a week, 16814 worker labor hours per week and 336 manager labor hours. At a minimum wage of $100 per hour, the weekly labor costs alone would amount to 188,160 USD, and for managers, approximately 39,984 USD. Annual labor costs could reach 1,186,349 USD. Revenue: An average McDonald's brings in about 2.7 million USD annually. After deducting labor costs of 200,000 USD, the profit is reduced significantly.

Consider other expenses such as food ingredients, paper products, and lease payments. Even with these low costs, a restaurant like McDonald's would struggle to maintain operations under such wage conditions.

Addressing Inflation and Cost of Living Increases

Inflation and increased living costs are inevitable consequences of higher minimum wages. When the lowest wages increase, so do the prices of goods and services, perpetuating the cycle of stagnation. It is important to recognize that the purchasing power of those earning the minimum wage remains constrained.

Alternative Solutions: Education, Productivity, and Career Advancement

Instead of relying on minimum wage increases or Universal Basic Income, a more sustainable approach lies in improving the workforce and enhancing career opportunities. Education, productivity, and career advancement are critical in preparing workers for the jobs of the future, especially as technology continues to evolve.

History illustrates how technological advancements have created more and better-paying jobs. The industrial revolution saw the displacement of many farm workers, yet overall agricultural productivity increased, reducing prices and creating new job opportunities. Similarly, as calculators and computers replaced slide rules, millions of jobs were lost but countless others were created in new sectors.

By focusing on education, productivity, and career advancement, we can better equip the workforce for the challenges and opportunities presented by technological change. Training and development programs can help workers adapt to new roles, ensuring both economic stability and growth.

Conclusion

In conclusion, while the idea of a $100 per hour minimum wage sounds appealing, it is impractical and would likely result in severe economic consequences. Instead, we should concentrate on educational and vocational programs, career advancement, and fostering an environment where workers can thrive in evolving economic landscapes. These strategies offer a more sustainable path to economic security and growth.