Two recent articles on the effects of raising the minimum wage in America document conflicting outcomes in the face of increasing employment costs.
On the positive side, the CNBC article Minimum wage hikes actually boosted my sales: CEO quotes Bill Phelps, CEO of Wetzel’s Pretzels, as saying that the last two years the minimum wage in California increased by $1, his sales improved by 8 and 7 percent, compared to an average annual increase of 4.5%. He attributed the higher than average increases to the increased disposable income due to higher wages.
On the negative side, the Columbus Dispatch article Wendy’s to install ordering kiosks in 1,000 stores this year, quotes Bob Wright, COO of Wendy’s, as saying wages increased 5% in 2016 and are expected to rise 4% in 2017. In the past two years, Wendy’s has figured out how to eliminate 31 person hours of labor per week, and is now working to use technology, such as kiosks, to increase efficiency further. Kiosks may not immediately replace workers, instead shifting labor to other areas.
I’m highly skeptical of claims that there is no downside to increasing the minimum wage. Entry level jobs for unskilled workers will be eliminated to combat the increased cost of paying those workers. In a world where large corporations care only about maximizing short term profits and have a huge advantage in bargaining with their people, its tempting to empower the government to step in with minimum wages, but I would rather have employers and employees agree on a fair wage.
I favor cooperative bargaining over direct intervention. The government’s role should be to control the size of unions so that they don’t become more powerful than the corporations they are bargaining with, and to protect them from being busted by corporations if they are wanted by their employees. If all of Wendy’s workers agreed that increased wages were worth the job losses that would result, they could empower their representatives to bargain for those higher wages.