To solve the budget deficit, Governor Wolf’s mathematically magical budget also includes an increase in the minimum wage. He is advocating an increase from $7.25 to $12.00 per hour. The Governor claims that raising the minimum wage to $12.00 would generate $95 million in additional tax revenue. There are numerous reasons to be skeptical of this claim and a positive impact of the minimum wage in general.
Advocating for a higher minimum wage plays well with the public as a whole, but it ignores the reality that the real minimum wage is $0.
As the minimum wage increases, automation becomes more cost effective in a larger number of settings. In response to $15 per hour minimum wages in several cities, McDonald’s and Wendy’s have rolled out self-serve kiosks to replace the workers who were taking orders. The government bodies who thought they would reap the rewards of higher wages to tax now tax nothing. Furthermore, there is now a cost to taxpayers for government benefits for the newly unemployed.
While the trend toward automation for low-skill positions is relatively new in fast food, the impact of higher minimum wages on the lowest skilled workers has been the subject of years of research. In reviewing the data, the Federal Reserve Bank of San Francisco found that "the overall body of recent evidence suggests that the most credible conclusion is a higher minimum wage results in some job loss for the least-skilled workers-with possibly larger adverse effects than earlier research suggested."
A multitude of unintended consequences come from a government mandated versus market-based wage. After a ballot measure increasing the minimum wage passed in Washington state child care costs skyrocketed. Another concern is that the minimum wage will have a disproportionately larger adverse effect on smaller business than larger ones. Who would have an easier time paying for higher labor costs, Walmart or your local hardware store?
No one wants their neighbor to live in poverty. However, the minimum wage and increases in it are not the way to address the problems of poverty or increasing tax revenues. An increase in the minimum wage would cost some people their jobs, shutter small businesses, and drive up consumer costs in Pennsylvania. And, none of those things are good for the Commonwealth.
PS: Have you contacted the General Assembly and Governor about the budget yet?