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Why Big Business Loves Minimum Wage Increases

Justin Sullivan/Getty Images

On Monday, Amazon took out a full page newspaper ad reading, “It’s time to raise the federal minimum wage.” It then went on to urge a federal minimum wage hike to $15 per hour, up from $7.25 per hour in the status quo.

Why is Amazon — one of the most successful companies on the planet — using their time and money to advocate for a higher minimum wage, of all things? Contrary to some initial reactions, it is not due to their sincere good-heartedness; they did not simply wake up one morning and decide to be exceedingly nice that day. Rather, it is because increasing the federal minimum wage would erect barriers to progress for Amazon’s competition, if not eliminate them completely.

It is in Amazon’s best interest for the federal government to impose this wage hike on every business in America, as their company-wide minimum wage is already $15 per hour. As a result, a federal increase would not affect them at all. However, it would greatly affect your average mom-and-pop shop which is struggling to stay alive amid the pandemic and subsequent lockdowns. Burdening these shops with additional costs imposed on them by the federal government is not a way to ensure a thriving small and medium-sized business market. Rather, it is an efficient way to slow down — or even completely halt — the progress of these businesses.

The nonpartisan Congressional Budget Office estimated that while over a million people would be lifted out of poverty as a result of a minimum wage increase to $15 per hour, about 1.3 million people would be left without a job — sinking them into poverty. Moreover, according to a survey from the Employment Policy Institute, 74% of economists oppose raising the minimum wage to $15 per hour.

When small and medium-sized businesses are unable to grow, it paves the way for more people to use Amazon’s services, thus making the change a net-positive for them. So far, the way Amazon has been able to capture so much business from smaller retailers is through better prices and high quality service; this is the honest way of increasing market share and profits. However, lobbying for a federal intervention in order to raise the costs of their competitors is completely different. Instead of beating out others on the basis of merit, they are now attempting doing it by mandating increased costs via the government .

Anti-competitive corporate activism masking as well-meaning political advocacy is not new; in fact, it is not even new in the area of minimum wage laws. The late economist Walter Williams details why entities such as unions or well-established businesses would advocate for such a policy in his book, Race and Economics. Williams notes that politicians such as John F. Kennedy in 1954, and Representative Joseph Resnick in 1966, supported increased prevailing wages in order to protect incumbent businesses among their constituents. He also discussed the reason unions have lobbied for minimum wage laws from their inception — namely to price low skilled workers out of the job market at the benefit of their union members.

In terms of more recent history, Walmart lobbied for a federal minimum wage increase in 2005 — eventually receiving it in 2009.

There are plenty of well-meaning activists who truly believe that an increase in the minimum wage would redound to the benefit of the average worker. While they may be incorrect, one would be hard-pressed to question their sincerity. When corporations advocate for the same policy, however, it must be recognized as an attempt to influence the government to rig the game in favor of incumbents. To believe in free markets must be to oppose this sort of bidding on behalf of corporations at the expense of your average community store. If you truly believe in free and fair markets, you must oppose an increase of the minimum wage to $15 per hour.

Author: Jack Elbaum

The views expressed are the author's alone and are not an official statement of GWCRs


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