Considerations for the U.S minimum wage debate

03 Mar

The minimum wage debate continues to rumble on in the U.S.  And it looks set to intensify this week as President Obama is set to make an appearance at Central Connecticut State University with a host of state governors who support his campaign to push to raise the federal minimum wage to $10.10 an hour.

This is a subject that, perhaps quite understandably, becomes emotional for those arguing in favour of a hike.

It is also a debate in which high-profile companies, such as major retailers and fast-food chains, could be tempted to react in a knee-jerk way if they believe that their public image is under attack for backing the campaign one way or another.

Recently, whilst lawmakers and politicians go back and forth on the issue, Gap, the clothes retailer, decided to increase its own minimum wage to $10 an hour in a policy it says it will implement over the next 18 months.

Meanwhile, Walmart, the country’s biggest single employer and largest and most influential retailer, said it remains “officially neutral” on the subject – despite some sources reporting that the firm has already decided to raise its lowest wages and that it will soon come out in support of an increase in the federal minimum wage.

When important brands (and major employers) are taking action on an issue, Congress is debating it, and the President is giving speeches about it, it’s hardly surprising that this is hitting the headlines. It is a big deal.

There are a slew of reasons for and against a minimum wage rise – and both hold water to a certain degree.

However, what concerns me is that those who are pushing for a higher minimum wage in the media are unintentionally misguiding the public, distorting the national conversation, and could end up hurting those they are seeking to help.

Here’s the rub about the proposed minimum wage hike: Big corporations – yes, the ones like Walmart which are being routinely demonised by supporters of the increase as symbols of unbridled greed- are the ones that will be able to absorb the increases in labour costs if/when they are enforced.

Their considerably smaller competitors – the small businesses of every kind that are the lifeblood of the U.S. economy – will be the ones that will be least able to take on significant additional costs.  As such, many of these companies, whether they be start-ups or established smaller firms, might find that they simply will not be able to maintain current staff levels at the higher imposed rates and/or not be able hire extra workers to grow and invest further.

This could have a serious negative impact on the country’s lowest paid workers (and therefore the wider economy) as small businesses employ more than half of all Americans – many of whom will be those whose wages are being debated.

Clearly then, such a minimum wage rise would not just be hitting the big corporations – in fact it could actually be advantageous for them as it could drive out competition from the marketplace as their competitors will struggle with extra expenses – it could also financially penalise those working in smaller companies as they might lose their jobs; and it could adversely impact the entrepreneurs (who risked their capital, time and other resources) as they might lose their businesses.

Nigel Green deVere Group

Blog written 3rd March


These are, I believe, important considerations that must be voiced in order to have a rounded, balanced debate.



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