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$15 Minimum Wage Would ‘Spell a Death Knell for Many Small Restaurants,' Expert Warns
[Foundation for Economic Education] President Joe Biden is pushing for inclusion of a $15 federal minimum wage in the next COVID-19 spending package, hoping it would stimulate the economy. But a top financial expert just warned it would do the opposite—and spell doom for restaurants and small businesses. A higher minimum wage "reduces firm’s incentives to hire more minimum wage workers," Olin Business School finance professor Radhakrishnan Gopalan said. "This effect would be all the more enhanced when firms are hurting from the pandemic." "The restaurant sector, which employs a significant number of minimum wage workers, and the retail sector are struggling," Gopalan continued. "Raising the minimum wage now would spell a death knell for many small restaurants." The professor isn’t speculating. His research has shown that businesses respond to minimum wage increases by reducing future hiring, leading to an overall decline in employment among minimum wage workers. And this is part of a broader empirical data set confirming what economic theory demonstrates: that minimum wage hikes eliminate jobs. As for the $15 minimum wage proposal, the nonpartisan Congressional Budget Office estimated that it would eliminate 1.3 to 3.7 million jobs nationwide. That estimate is using a pre-pandemic scenario—there’s plenty of reason to think the impact would be even worse now. Posted by: Besoeker 2021-01-29 |
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