Surging minimum wage harms SJ's less wealthy residents, says expert

Minimum wage in SJ is, as per usual, on the rise, and is now sitting pretty at $17/hr. David John Marotta explains in Forbes that increasing the local minimum wage disproportionately hurts less privileged, lower-income residents—who find they've been replaced by more qualified (or even automated) counterparts.

Many starter jobs sacrifice some of the pay in order to provide educational opportunities and other benefits. These benefits are often more important than the pay received. Forcing employers to pay a higher wage is sometimes at the expense of the benefits employees want more.

For an employer, the alternative to a minimum wage job isn’t a higher paying job. The alternative to a minimum wage job is outsourcing or automation. With technology today, both are possible.

Your order at the McDonald’s drive through can be routed to a call center in India. The worker in India can take your order with wonderfully articulate English skills and training to up sell the latest products. Meanwhile, a team of people cooking burgers can be replaced by a culinary robot and a $15 per hour supervisor. Even for a job at the local McDonald’s, the talent pool can be the entire world.

There is a price at which outsourcing and automation can replace minimum wage workers.

The consensus among economists is that 1% to 2% of entry-level jobs are lost for every 10% increase in the minimum wage. Raising the minimum wage from $7.25 to $15 could mean a reduction in entry level jobs of 11% to 21%. These estimates would suggest between 1.8 and 3.5 million of jobs lost. These jobs won’t show up on unemployment statistics. You need to have had a job before your attempts to find one are counted as being unemployed.

This article originally appeared in Forbes. Read the whole thing here.

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