McTrouble: Unintended Side Effects of Raising the Minimum Wage

Posted by Tucker Nelson on Thursday, May 29th, 2014 at 2:52 pm - Permalink

On May 21st, more than 1500 McDonald’s employees and pro-union members met in Chicago to hold a rally in protest of a raise in the minimum wage. This rally happened one day before shareholders at McDonalds voted on executive salaries.  McDonald’s workers were demanding a raise in the minimum wage to $15 an hour, more than double the current federal minimum wage of $7.25 an hour, as well as the ability for the workers to unionize. More than 100 protesters at the rally were arrested for trespassing.

The debate over the minimum wage has been a hot topic issue in America as of late. President Obama has been urging Congress to raise the minimum wage to $10.10 an hour for many months now. For over a year and a half, cities around the country have seen protests by fast food workers targeting the businesses of McDonalds, Burger King, Wendy’s and KFC.

The Service Employees International Union (SEIU) has been a leader in the fast food unionizing movement for many years now. The union is an avid supporter of a minimum wage hike. President of the SEIU Mary Kay Henry, one of the 100 arrested in the May 21st protest, has been quoted justifying her organization’s involvement by saying “Fast-food workers in many other parts of the world face the same corporate policies — low pay, no guaranteed hours and no benefits." The SEIU hopes to be able to change that for the fast food workers.

 So what would actually happen if the minimum wage was raised to $15 an hour and fast food workers were able to join a union?

Research Director of the Employment Policies Institute, Michael Saltsman believes that the $15 an hour wage demand by the workers is “outlandish” and that “Instead of securing higher paychecks, these union-backed protesters are going to send fast food employees straight to the unemployment line… The idea that fast food restaurants can absorb a $15 wage mandate without consequence is so outlandish that even liberal economists acknowledge the costs.”

These demands, if granted, are going to come at a cost. Some workers may lose their jobs. We might see fast food prices rise to offset higher labor costs if the minimum wage hike was mandated.

 The Congressional Budget Office estimated in February of 2014 that if the minimum wage were to be increased to $10.10 an hour that the economy could expect to lose up to 500,000 jobs by 2016, but if the minimum wage was raised just to $9.00 an hour only 100,000 jobs would be lost. Who knows what the estimated job loss would be if the minimum wage was raised to $15 an hour.

These protests also come at a time when McDonalds has been battling with higher than normal beef prices and sluggish sales. To then add on an extra cost of a minimum wage hike, McDonalds could be in deep trouble profit wise. This could be detrimental to McDonald’s ability to open more stores, thus restricting its ability to create jobs in the future.

If the minimum wage hike passes the fast food industry could be the next auto industry, the SEIU the new UAW, and many people like in Detroit without a job.