The Minimum Wage Forces Low-Skill Workers To Compete With Higher-Skill Workers

The efforts underway by the Service Employees International Union, and its political and media allies, to raise the minimum wage from $7.25 to $15 per hour would, if successful, cause major unemployment among low-skilled workers, who are the supposed beneficiaries of those efforts.

The reason is not only the fact that higher wages serve to raise costs of production and thus prices, which in turn serves to reduce physical sales volume and thus the number of workers needed. There is also another equally, if not more important reason in this case, and it is a reason which is only very inadequately described by reference to the substitution of machinery or automation [7] for the direct labor of workers when wages are increased.

This is the fact that a low wage constitutes a competitive advantage for less-skilled workers that serves to protect them from competition from more-skilled workers. In other words, a wage of $7.25 per hour for fast-food workers serves to protect those workers from competition from workers able to earn $8 to $15 per hour in other lines of work. The workers able to earn these higher wage rates are not interested in seeking employment at the lower wage rates of the fast-food workers.

But if the wage of the fast-food workers, and all other workers presently earning less than $15 per hour, is raised to $15 per hour, then these more capable workers can now earn as much as fast-food workers as they can in any of the occupations in which they had been working up to now.

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