An In-depth Analysis On The Minimum Wage Debate Through The Perspective Of Employers

In response to the 2019/20 Annual Wage Review on the minimum wage regulations, the minimum wage should neither be increased nor decreased.

A rise in minimum wage can do more harm than good, as it can negatively impact small and family-run businesses, as well as negatively affect the economy as a whole as it may cause inflation to rise and make it harder for workers to begin their careers. Based on a 2013 Gallup poll, “60% of small-business owners say that raising the minimum wage will hurt most small-business owners,” and according to the Australian Tax Office, almost one million small and family-run businesses made little to no profit at all in the last year and if a substantial increase is made on the minimum wage, it may force these business to permanently close down (Pearson, 2019). This affects their employees, as they will no longer be employed and will have to go through the tiresome process of job-searching once again.

Raising the minimum wage may also drive companies to wind up using automated processes and technological advantages in order to compensate human labor. Meaning, since companies can longer keep up with the rising costs of labor, they may resign to automation in order to avoid paying for labor and refrain from hiring workers. Based on the 2019 OECD Employment Outlook Report, businesses shifting towards automated processes are significantly affecting the unemployment rate as present-day machinery is now able to perform complex tasks in the service industry, leaving workers to upskill themselves in order to meet the criteria of those of robots (Mullock, 2019). The rise of automated processes is also making it more difficult for low-skilled individuals to find jobs, and the unemployment rate of those without higher education diplomas has significantly worsened in recent years. As said in the 2019 OECD Employment Outlook Report, “young people with less than tertiary education have been particularly affected, with more of them being under employed, non-employed or receiving low pay; because of this, Australia saw one of the largest increases in under-employment across OECD countries since 2007.”

For those in favor of a raise in the minimum wage, a solution may be to increase prices of the goods and services of the business. This solution may be ineffective as it can go either positively or negatively. This is because it offloads the labor costs to the consumers through higher prices. This is bad news for younger workers who live off of the minimum wage, as they may not be able to catch up with the rising levels of inflation and their income will only be consumed by the rising prices of businesses. If consumers are no longer willing to pay more and move onto another business that offers lower prices, this will result in the employer being forced to cut down labor hours and may even result in laying off workers (Pearson, 2019).

Overall, an increase in minimum wage is more damaging than what meets the eye. As stated in the points made above, raising labor costs would stress the unemployment system, as well as causing a “scale effect,” meaning costs would be passed onto the consumers and create a bigger need to increase the minimum wage. In an economist perspective, raising the minimum wage will harm the business more than it will benefit it, especially if that business is small or is family-run. The best possible solution is to keep it as it is, so as to not depress unemployment rates, stress the labor market, and disturb inflation and present-day economy rates.