Paying above the minimum wage helps companies encourage loyalty in their employees, says President Obama (at about 2:20). That’s why Costco and now The Gap are paying at a higher rate.
That is not an argument for having a minimum wage, let alone for raising it!
As soon as the minimum wage is raised, all those benefits are erased. If you work at a place that makes a policy of paying above the minimum wage for what is, in most comparable places, paid at minimum wage, then you are working for a company that pays more in order to be able to get more applicants and pick out employees who they hope will be better than average. You may have put up with a longer job interview and with, initially, less job security during your probation period, than employees at other places that paid less. Now, you are less likely to move on to a comparable job because they probably won’t match your current pay.
If the government forces everyone to raise their wages, all of those benefits vanish. The only way Costco will be able to get them back is by raising the wages of their workers even further above the new minimum. Otherwise, their employees suddenly find they can go anywhere for the same pay.
So all the other businesses that were paying less and dealing with a more problematic average worker now have to pay more under an increased minimum wage but they don’t get any greater customer loyalty.
President Obama simply refuses to contemplate the lower employment that will result from a mandated higher minimum wage, or the price inflation. If stores pay more they are going to have to make more money to stay in business. In that case, the actual buying power of the more highly paid employees won’t be better than it was before. If The Gap finds it cannot afford to offset higher expenses with higher prices, it will have to find a way to streamline operations and make do with fewer employees or start closing stores. So some will be paid more but others will be out of work.
Obama is essentially promising, “If you like your job now, you can keep your job after we increase the minimum wage.” He has no power to keep that promise.
The only way this might work out for the Gap is if they are positioned high enough that a competitor goes bankrupt first so that they start getting more business. But in that case, still, the net change will be more people without jobs. If you like your job, you might lose your job rather than keep your job with higher pay. Surely someone will. Will you enjoy your larger paycheck, knowing the price is that others got fired?
“Give America a raise”? America does not have an employer. Millions of Americans work for millions of employers. Stop intruding on their decisions, Mr. Obama! You will only increase unemployment, prices, or both.
By the way, the labor participation rate for young people is at the lowest it has ever been. And for African American youth it is worse than for others. The unseen damage from this law, that the Liberals will insist is not happening, is that our alleged “jobless recovery” will stay jobless for these people.