Well, we decided to look into what might happen if the minimum wage was raised to $15 across the world. The results were… intriguing, to say the least. While realistically, the idea of a global $15 minimum wage is as likely as flying pigs farting unicorn rainbows, it’s still interesting to imagine what the outcome would be. The answer is: insanity.
10. The Rise of the Machines
Forget Terminator. Forget The Matrix. The real cause of the machine revolution lies not in military programs, but in the battle for a higher minimum wage. According to The Economist, there’s only one likely outcome to a yuge minimum wage hike: mass automation.
Right now, machines and computers are capable of doing a heck of a lot that low-skilled humans can, such as driving trucks and manning checkouts. The reason that they don’t isn’t due to some fancy-pants robot-workers’ union, but because they simply cost too much. It’s way more cost-effective for an employer to keep you working at the checkout for $7.50 an hour than it is for them to buy a machine to do your job, so they don’t.
But when that $15 wage hike comes in, suddenly the robots are looking a lot more attractive. The outcome? Jobs will disappear faster than you can say “Skynet.”
Nationally, millions would be out of work. Globally, billions. That would mean completely restructuring our economies to deal with permanent mass-unemployment; a shift which wouldn’t come easy.
9. The Poor Would Still be Poor
It’s important to note that robots still suck at certain jobs. Cleaning, for example, is better being done by humans. Mass-automation wouldn’t really affect such sectors. So that means a minimum wage hike would still lift some out of poverty, right?
Most supporters of the $15 minimum want to reduce poverty. But the minimum wage rarely affects those who are truly poor. Only 12.7% of US minimum wage workers come from poor households. Just under half are secondary-income earners from households with earnings three times higher than the poverty line. In other words, they’re teenagers starting their first job, or parents who took time out for raising kids and now want a bit of part-time work to fill the empty hours.
The result would be a boost to these people’s finances, for sure. But the vast majority of American poor either already make $15 but don’t get enough hours, or simply don’t work at all. A mass-applied $15 minimum wouldn’t affect this cohort one bit.
8. Mass Migration
In the 1980s, well-meaning legislators accidentally screwed-over Puerto Rico. As a US Territory, the island became subject to the US Minimum Wage. Hooray for Puerto Rico, huh? Not so fast. The knock-on effect of this wage increase was to drive a huge chunk of the island’s residents to migrate to mainland USA.
This sounds counter-intuitive, but it makes perfect sense. Puerto Rico is poor. There was simply no way employers could afford the mainland minimum wage. With automation in 1983 being a pipedream, they simply laid off workers and sent unemployment skyrocketing.
Something similar would happen with a global minimum wage. Rich cities and countries that could afford the $15 hit would suddenly become Meccas for those from poor areas which couldn’t afford it. The jobless poor would flood in from territories and rural areas that couldn’t pay, leading to perhaps the greatest wave of human migration in history. And as we all know, mass-migration doesn’t always go completely smoothly…
7. Rampant Xenophobia
During the Great Depression, hundreds of thousands of Americans were forced to leave Dustbowl States to look for work. Oklahoma alone lost nearly half a million of its population to more-prosperous states like California. How did the residents of richer states react to this sudden influx of poor, depressed and unemployed people? They freakin’ hated their guts.
Okies were the subject of extreme discrimination from locals who thought they were stealing jobs, bringing crime, undercutting wages and just generally stinking up Sunny California with their Okie ways. Never mind that most of the Okies were family folk who just wanted to do some honest work and contribute to California, they were still hugely unpopular.
It’s not hard to imagine something similar happening if a $15 minimum wage drove people from poor, rural areas into rich, urban ones. On a national scale, it would be uncomfortable. If it was global, then throw in racism and culture clash and you’re potentially sitting on a powder keg.
6. Poor Countries Would Become Poorer
Everyone reading this can probably agree that paying Bangladeshi workers $0.50 per hour to toil in a sweatshop is morally ugly. Unfortunately, it’s also the way the world works.
Poor countries like Bangladesh, Ethiopia and Haiti are chronically in need of investment. To ensure companies want to set up shop there, they have to offer something the West can’t. Sadly, that ‘something’ is extremely low-wage employees. Create a world where everyone from a trucker in Arizona to a garment-maker in Dhaka is worth $15 an hour, and you destroy the only competitive advantage these countries have.
For a company in the US, it suddenly makes no sense at all for them to set up a factory in Asia when it costs the same as setting one up in America. So they won’t. Unless poor countries sacrifice something else in return for investment, that investment will simply dry up. Bangladeshi jobs will vanish, money will disappear, and poor countries will get even poorer.
5. The End of Outsourcing
On the other hand, this would mean the end of outsourcing; a practice generally considered to be so mercenary it probably counts as one of the 7 Deadly Sins. While this is extremely bad news for those living in poorer countries, it could be pretty good for those living elsewhere.
Right now, a lot of jobs that used to be done by Americans are being done abroad for a fraction of the cost. Take away those cost incentives to move abroad, and those jobs will probably stay in America (provided the government did other stuff like cut corporation tax). For those industries that can’t be automated, it could result in a glut of work available at home. It would be the same thing both Trump and Bernie Sanders like to talk about: American jobs for American workers.
The downside is there are other ways countries could attract multinationals even with a global $15 minimum wage, such as low corporation tax, an unregulated market or removing certain labor restrictions. In practice, then, a global minimum wage of $15 might not end outsourcing. Instead it might trigger a race to the bottom in an entirely different area.
4. A Gigantic Small Business Crash
There’s a reason campaigns like Fight for $15 stir so much moral fury. The idea that a multi-billion-dollar empire like Walmart can get away with paying its employees $7.20 per hour makes any reasonable person’s blood boil.
The reality is that plenty of minimum wage employees aren’t slaving away in Walmart. They’re working for small businesses. And asking those small businesses to double their employees’ wages is like asking them to start handing out blocks of gold to all of their customers.
Around a third of minimum wage employees are working at businesses that employfewer than 50 people
. Force a $15 minimum on these places, and they’re gonna go under or lay off staff or (more likely) both. That means a collapse of small businesses across the board, something that’s not exactly thrilling for stuff like innovation, the economy, or just having a few more choices of coffee place beyond Starbucks.
Most of us value small businesses and independent Mom-and-Pop stores. We also value the idea of workers being paid a good minimum wage. Sadly, these two things can often be mutually-exclusive.
3. The Rise of Freelance Contract Work
One of the big flaws with the minimum wage is that there are quite a few ways around it. Most of you reading this probably work in an industry that utilizes one or more of them. For example, your place might take on unpaid interns over summer. Or maybe those looking for a promotion can take part in a scheme that temporarily increases their responsibilities while not affecting their pay scale.
In many industries, the ‘get around’ comes from freelance contract work. This is especially prevalent in the world of online writing which – surprise! – we happen to know a great deal about. The basic set-up is that the website will pay you per article, not per hour worked. If you’re a dashingly-handsome internet-writer with chiselled abs this isn’t a problem, as you’re capable of writing a $15 article in way under an hour. But for someone without those skills or looks… well, then you got a problem.
In a world where the $15 is everywhere, plenty of companies are gonna avail themselves of freelance contracts. This means people who aren’t suited to them languishing away, taking hours and hours and hours to complete a task which will net them only paltry sums. So how about we get rid of these contracts altogether? Well, then you’re stuck with plenty of businesses going bust… and all those same workers now making nothing at all.
2. An Explosion of Spending
By now, we suspect some Fight for $15 fans are more than a little upset with the direction this article has taken. Hey, thems the breaks. We just go where our research leads us. And for this entry, it has led us to a potential light at the end of this dark and mold-infested tunnel. There’s a chance a $15 minimum could spark an economy-reviving spending spree.
This comes courtesy of Bloomberg, an outfit not exactly known for its leftish politics. The argument is pretty straightforward. A capitalist economy relies upon workers using their wages to buy stuff they want but don’t really need. This is the engine that drives growth. Whisk away that extra part of their paycheck marked ‘conspicuous consumption’ and the economy falters. Conversely, inflate that part wildly with a $15 minimum wage, and sit back and watch as the economy goes into overdrive.
The theory is that people who earn the extra money would spend and spend like lunatics. Goods would be flying off shelves. Vacations would be booked en masse. Services would be purchased, money would go flying through the economy, and everyone would wind up being a winner. It could be a boom to rival the 2008 bust, the sort of massive boost we haven’t seen in ages.
1. Everything or Nothing
At the end of all that, we have a confession to make. We don’t know what would happen if the minimum wage went to $15 everywhere. That’s not us being uninformed: literally no-one knows.
While there have been plenty of studies done on minimum wage hikes, there has never been one done on a hike as enormous as the $15 one would be. It simply hasn’t happened before over a large enough area, or in enough places, for anyone to draw any firm conclusions. As a result, it’s easy to find respected economics writers claiming that a national $15 minimum would be the best thing ever; just as it’s easy to find respected writers claiming that such a hike would trigger the apocalypse.
What we’ve done above is drawn on what a plurality of economists seem to think, and what theories seem to suggest, to try and draw conclusions. The reality is, no-one knows for sure what would happen applying the $15 minimum on a national scale, let alone an international one. The only certainty is that the effect would be enormous, and possibly world-changing. Whether for the better or the worse is something we’d simply have to wait to find out.
The $15 Minimum Wage
– WIF Speculation