Economy 102 – Good for Business

One Sentence Argument:

Our whole economy benefits when the people most likely to spend money have more in their pockets.

Poverty wages suffocate the consumer demand our economy is built on. Virtually every business in America is dependent on regular people having enough money to spend on the goods or services they sell. As a business owner, you’re better off if the people in your community make more money, because that means they can spend more money at your business.

If your business relies on your employees showing up to work fed, clothed, healthy, rested, and clean, and you pay them less than they need to afford food, clothes, healthcare, and a decent place to live, you are sucking the life out of your local economy. On the other hand, paying workers enough to live on empowers them to spend money in their local economies and build them from the ground up, benefiting everyone.

If we increase the federal minimum wage to $15 an hour there are obviously going to be some businesses that have to cut back on hours or move more quickly towards automation, but those few cases are going to be more than offset by all the new businesses that open or existing businesses that expand to meet additional consumer demand. There’s just no evidence from dozens of real life case studies we have on raising the minimum wage that this is a real issue. 

In the 90s, economists compared fast food employment in New Jersey (which raised its minimum wage in 1992) and Pennsylvania (which did not), and found no evidence that New Jersey’s higher minimum wage had reduced employment. San Francisco and Santa Fe are large cities with two of the longest track records of minimum wages above the federal level, and multiple studies show that there are “no statistically significant effects on employment or hours (including in low-wage industries such as restaurants).” Even when looking at counties directly next to each other across state borders with different minimum wages, when it would make the most sense that businesses might move across state lines, researchers found no evidence that restaurants or retail businesses employed fewer people in the higher-wage side of those state borders. 

More recently, a September 2018 study based on US Labor Department data on minimum wage increases above $10 an hour in Washington, Chicago, Seattle, San Francisco, Oakland, and San Jose showed that wage increases do not hurt job growth. The study found “no significant employment effects” in any of the 6 cities, and actually estimated that the wage increase could cause up to a 1.1 percent increase in job growth.

Despite all the evidence indicating that higher minimum wages don’t hurt businesses or kill jobs, many people still think otherwise. Why? Because the Chamber of Commerce, the so-called voice of business in American politics that is actually primarily controlled by the large, multinational corporations that are the most powerful and vocal advocates against a higher minimum wage, has spent millions poisoning the public discourse. 

The Walmarts and McDonalds of the world have a vested interest in keeping their thousands of employees paid as little as possible while relying on government welfare programs to survive. The owners of the small businesses that make up the majority of the American economy, on the other hand, actually see the value in raising wages. So while the national Chamber of Commerce may be an outspoken opponent of raising wages, their members are overwhelmingly supportive of a higher minimum wage.

In fact, the Chamber of Commerce conducted a secret survey of their own members that showed 80% of business leaders want a higher minimum wage, with only 8% opposed.

And it’s not just polls and opinion surveys that show businesses think workers should be getting paid more. Many businesses, including some very large corporations like Target, are putting their money where their mouth is, and have committed to paying every single one of their workers at least $15 an hour.

The business community is far from monolithic when it comes to views on the minimum wage, but it’s clear that all the politicians who criticize the minimum wage for being “anti-business” should spend less time talking with Chamber of Commerce lobbyists, and more time talking with actual business leaders.

NEXT: Economy 103–Actual Progress on Conservative Priorities →