Paying the Price: Businesses Wary of Minimum Wage Hike

If Joe Biden is sworn into office in January, one of the policy items he will try to implement is raising the federal minimum wage to $15 an hour (it is currently at $7.25 an hour). Biden voiced his support for the idea throughout the campaign, saying in the final presidential debate, "(Workers) deserve a wage of $15 an hour...anything below that puts you below the poverty line." Biden went on to say, "There is no evidence that when you raise the minimum wage that businesses go out of business. That is simply not true."

They may not go out of business, but companies will certainly change the way they do business if the minimum wage is more than doubled. In the same debate, President Trump responded to Biden, "When you're forcing wages, what's going to happen and what's been proven to happen, is when you do that, these small businesses fire many of their employees."

Indeed, businesses are preparing for a potential Biden minimum wage hike, reportedly considering raising prices, reducing worker hours, or spending more on technology and automation to streamline operations. Warnings about the consequences of a massive minimum wage increase are nothing new. Earlier this year, the former CEO of McDonald's blasted the idea.

There is also data to back up these criticisms. The Congressional Budget Office has estimated a federal $15 minimum wage would lead to the loss of as many as 3.7 million jobs. When House Democrats passed a minimum wage hike last year, Houston Congressman Dan Crenshaw cited the potential lost jobs, while noting that even those who keep their job and get a raise would have much less buying power. "The cost of a lot of goods, especially in places like restaurants and grocery stores where low-income people would need to shop, those costs would rise, and therefore people's purchasing power would go down," said Crenshaw.

That House bill died in the Republican-led Senate last year, but if Biden takes the White House Democrats will no doubt try again.

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