Call to increase minimum wage now from $3.50 per hour to $4 or $5 is being echoed as the solution to the increasing cost of living such as increased fuel cost, increased utility rates, and cost of goods in general.
But will increasing the minimum wage now really achieve what we expect it to do? Will it increase salaries and help people bear the high cost of goods and costs of living? Yes, but only those earning a minimum wage of $3.50 per hour right now.
Although it sounds logical and sounds very very good, especially if you are a politician but in practical terms, I don’t believe it will help most of us. It will further increase the cost of goods and services we already bear.
First of all, ask yourself, are you getting paid $3.50 an hour? If that’s the case, then yes, the minimum wage will help you. But if you are making $3.75 an hour? Will it help you? Yes, if the minimum wage is raised to $4 per hour. But if you are getting paid $4.00 per hour and the minimum is raised to $4 per hour, it does not mean that your salary will increase. Minimum wage law does not mandate your employer to increase your salary relative to the increase in the wage of a person below you. In all fairness, it should be done but it is not part of the law. What a minimum wage increase will do for you if you are making $3.75 or $4 an hour, will make the person with fewer skills, less experienced, and perhaps was just hired a couple of months ago, to have the same salary as you. It will cost a lot for an employer to adjust the salary of every level of an employee even if it is the right thing to do and even more difficult now because of covid impact on the economy.
Most people who are working for the government are NOT on minimum wage. Most private-sector employees on minimum wage are foreign labor contracts. Yes, the minimum wage increase will help some locals and most of the foreign laborers such as farmers, general construction laborers, and domestic helpers.
I’ve heard retirees calling for minimum wage as well citing the increase in costs of living. This minimum wage increase will not help the retirees because they are not getting a salary. What it will do for them is further increase the cost of goods and services they use and lower the buying power of their retirement benefits.
Right now, for example, the cost of fuel is about $5 per gallon. People hired to pump gas are paid $3.50 per hour. No experience or education is needed to hire. Now if the salary is raised to $4 or $5 per hour, the cost of fuel will go up as well so that the business can afford to pay the salary increase. The cost to business is not just the salary but the income tax, social security contribution, and health insurance which are percentages of the salary. Given the severe contraction of the economy due to the pandemic impact, businesses will either have to increase the costs of goods and services or cut employment further. Most businesses have cut down to the bare minimum just to survive this pandemic. Most employees are already working on reduced hours. A minimum wage increase will either cause further reduction of working hours or cut off some of the employees. And it will definitely increase costs of goods and services to all consumers.
Next month, the cost of container freight is expected to increase again. We already know that it has nearly tripled the cost before the pandemic. One 20-footer container of goods from the US used to cost $2,000 in 2019, now it’s $6,000 to $8,000. It is expected to go to $10,000. This means that we will see costs of basic goods rise, probably doubling the prices of 2019 if not higher.
A minimum wage increase now will only add to that increased cost that is outside of our control. We can’t dictate shipping rates but we can dictate minimum wage. We are now almost 2 years into a pandemic that has wreaked havoc on our economy. A minimum wage increase at this time will not help us, rather, it will increase the costs of goods and services that we barely can afford now.
Let’s look to reducing our expenses and the government can help by continuing to subsidize utilities. At least that helps us stretch our meager dollars a little bit longer. Just my opinion. (L.N. Reklai)