Weve had innumerable people who have never run a business in their lives trying to tell us that the effects of a minimum wage rise can only be glorious. So its refreshing to hear the views of someone who will actually have to deal with the effects of a minimum wage rise: the CEO of Wendys. Amazingly, theyre not predicting that their newly better paid employees are going to spend so much more at their stores that their profit increases. Nor are they predicting that the rise in aggregate demand is going to do the same. Finally, theyve not broken down in tears, agreed that the shareholders are just too greedy, and insisted that the capitalist pigs will just have to do without so that the workers get their fair share.
No, instead they predict that that their restaurants will have to increase prices and reduce the amount of labor that they use.
That is, make all consumers worse off and also make some people unemployed. This isnt the bright new dawn we were promised about a rise in the minimum wage, is it? It is what people like me have been predicting but remarkably few people seemed willing to listen to us.
http://www.forbes.com/sites/timworstall/2015/08/11/wendys-explains-what-really-happens-with-a-minimum-wage-rise-job-losses/If raising the minimum wage doesn't lead to an increase in productivity then the only other choice is to either raise prices, which can often be difficult due to competition or reduce the workforce. Those whose productivity doesn't justify a rise in the minimum wage will find themselves unemployed.