In July 2015, we expressed our concerns regarding the proposed minimum wage hike for fast food workers in New York state. In our editorial, we asked why this increase couldn’t be extended to all minimum wage workers and whether raising fast food workers’ wages would create the unintended ripple effect of national chains replacing employees with machines.
Since then, the state extended the wage increase to most industries, and this week the minimum wage in New York went up to $9 an hour – the first step towards a $15-per-hour minimum wage in the state.
Fortunately, we haven’t heard about any plans to replace cashiers with kiosks at places like McDonald’s and Burger King. Still, the concerns we had back in July exist today.
For instance, what about the small business owners across the state who have to keep their overhead low in order to survive? By increasing the minimum wage, those business owners have to raise their employees’ salaries, which could – in turn – force them to raise the prices for their companies’ services. If they raise their prices too high, they could lose customers, which would then have the unintended consequence of layoffs or even closures.
National chain stores might also react negatively to the new minimum wage. Supermarkets, department stores and restaurants all could raise their prices to protect their profit margins, which would further restrict the average New Yorker’s spending power – something the minimum wage increase was supposed to improve. Again, the law of unintended consequences would take hold.
So, how can we guard against unintended consequences? Unfortunately, we can’t. The state cannot control prices in the stores and restaurants. The state Attorney General’s office could investigate companies for price gouging if it gets out of hand, but no one is going to bother if the increases are only slight or gradual to reflect the gradual nature of this minimum wage hike.
The best we can do is support local small business owners as much as possible, for they are the ones who drive our regional economy. For every state government office or international corporation that employs local workers, there are dozens of small businesses struggling day to day to survive. If too many of those businesses have to close, our unemployment rate is going to surge, which would have the unintended consequences of more people needing government assistance to survive and fewer people spending money for anything but the essentials.
Admittedly, it’s not always economically feasible to turn to local businesses first. National chains undercut the mom-and-pop stores with lower prices, and they plop themselves down in highly visible locations. But if we continue to turn to national chains first, our neighbors will suffer.
So while it may be difficult to do, let’s all make the effort to use whatever buying power we gain from the minimum wage increase to support our local businesses and prevent unintended consequences.
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