A Raise Of The Minimum Wage & Its Effects On Small Businesses & Least Qualified People

In recent years, a number of business and political actors have come out about the raise of the minimum wage rate, stirring the debate surrounding this issue and raising the question of whether or not the minimum wage rate should be raised. I do not believe a raise of the minimum wage is a miracle solution to poverty. To support my point of view, I will first explain how a raise of the in minimum wage will diminish jobs, then present how it will affect small businesses and least qualified people, and finally contrast my arguments with positive outcome of the raise.

The raise of the minimum wage can increase the incentive for companies to invest in robotization and automation in order to reduce salary expenditures. This can be seen through the creation of crates without attendants in supermarkets, or touch screens to order meals in some fast food restaurants. Far to be a bad thing for the economy as a whole, the productivity will increase, but it certainly goes against the objective of helping low pay workers. The raise of the minimum wage can increase the incentives for companies to invests in robotization and automation, in order to reduce salaries expenditures. This can be seen in supermarkets with the creation of crates without attendants, or in some fast food restaurants with the implantation of touchscreens to order meals. Far to be a bad thing for the economy, these changes will bring an increase in productivity, but will certainly go against the objective of helping low pay workers.

The robotization is not only seen in the restaurant industry, but also in the transport industry evidenced by the arrival of autonomous taxis a few years back. The automation can also be seen with the alliance between Google, Uber, its competitor Lyft, Ford and Volvo to precisely advance the cause of autonomous cars "without driver" in the United States. In his article “increase in minimum wage kills jobs”, Michael Saltsman says that the employment rate was reduced by 36.5% in New York, due to an increase in minimum wage between 2004 and 2006.

An increase of the minimum wage leaves few people indifferent. The idea unleashes passions. Workers dream of it, but do not always express it openly for fear of retaliations from the establishment that pays them. Setting a higher minimum wage will not go smoothly. It will direct more or less heavy readjustments depending on the size of the company. The hike will be partially absorbed by companies that will have to lower their profit margins and, in some cases, increase their sources of revenue by slightly raising the prices of their goods and services. Workers will not be left behind. Some will see their work time reduced and, in some cases, just fired. These are individual dramas that cannot be dismissed simply by hand, they will eventually happen.

The accepted economic theory considers that any setting of a mandatory floor price will create an imbalance by decreasing demand and increasing supply. The hike will have the undesired effect of ousting, from the labor market, the least experienced and least qualified people. That's what Ed Rensi, the former director general of McDonald's, feared if the minimum wage was raised in the United States. The strongest companies will eventually have the opportunity to invest in machines to do the least qualified work (this is clearly the direction taken by fast food), while small businesses will be forced to fire or even close (like the Cultured Yogurt and Country Host West, located near the Walmart on Woodlands Village Boulevard, whose owners were yet completely acquainted with the policy).

The concerns raised above by the increase of the minimum wage have negative impact on employment. The reasoning comes from the fact that raising the minimum wage increases the operating costs of some companies, and if they are not ready to support this increase, they will choose to dismiss some employees and keep only certain employees. a small number that will allow them to maintain their payroll unchanged. On the other hand, several studies show that a happier employee is more efficient at work. He is more productive, more motivated, takes less sick leave, and works better with his colleagues. Career opportunities and pay are two of the top three factors affecting job happiness, according to a survey in Britain by the Social Market Foundation and the University of Warwick’s Centre for Competitive Advantage in the Global Economy. a low salary would therefore be synonymous of a lower motivation and happiness at work.

Indeed, a study showed that employees who said they were "happy" were 12% more productive than average employees, and that unfortunate employees were 10% less productive. When we know that more than one American in two is dissatisfied with his salary, one can imagine that increasing wages plays a lot on their quality of life at work and therefore their productivity. This is particularly true for very low wages, since a small increase can significantly improve their quality of life (decrease stress, improve concentration ...). From a logical point of view, if robots were only replacing human workers, job losses would be greater in countries where investment in automation is the most substantial. The loss of employment often plunges us into a torrent of emotions that overwhelms us and leaves us speechless.

Overnight, we suffer a whirlwind, very unusual, emotional reactions, and this sometimes leaves us in an indescribable mess. Also, around the world, small companies play a leading role in innovation and job creation. It is therefore absolutely essential to understand what are the real issues and opportunities that shape the future of small businesses. Small businesses constitute a considerable part of the economic fabric of many countries and employ a large proportion of the world's labor force. Although there is no accurate data, according to World Bank research, small companies account for 95% of all businesses and employ 60% of the workforce in the private sector. So, the diminution of small businesses will be a loss for the economy of a country.