Just because they "are plenty employed" and that unemployment is still low doesn't mean that nobody got priced out, nor does it mean that nobody had their hours reduced, profit margins go down, or prices raised, to compensate for the wage increase.
In all, 4.3 million workers are slated to receive a hike as they earn less than the new minimum wage in their respective states. Well, that’s what’s meant to happen. Judging by the fallout from recent hikes, it seems things aren’t going according to plan.
Minimum Wage Massacre
In February, Wendy’s CEO Bob Wright said the firm expects wages to rise at least 4% in 2017. Wendy’s has three options to offset the rising costs.
First, they could cut margins, but with an 8% margin, that’s unlikely. The second option is to raise prices. Given how price-sensitive consumers are these days, that too is a non-starter. Finally, the firm could reduce the amount of labor they use… and that’s exactly what they did. Wendy’s eliminated 31 hours of labor per location, per week.
However, their locations are just as busy. To keep output steady, they are planning to install automated kiosks in 16% of their locations by the end of 2017. David Trimm, Wendy’s CIO said the timeframe for payback on the machines would be less than two years, thanks to labor savings.
Market leader McDonald’s has also been automating. Last November, the firm said every one of its 14,000 US stores will be replacing cashiers with automated kiosks. McDonald’s has actually prioritized these changes in locations like Seattle and New York that have higher minimum wages.
For companies, paying entry-level, unskilled workers the same they would pay a manager or a seasoned employee doesn’t make any sense—not because employers aren’t compassionate but because they would have to pull in more money to afford these high wages.
When governments force them to pay unskilled workers more, they necessarily have to cut costs somewhere to avoid losing money. After all, the goal is staying open and profitable. If the employer is losing money, he or she can’t pay anyone anything.
The way they find to cut costs is to cut the number of employees on payroll. And precisely because labor laws are already so suffocating, employers must use other excuses to fire employees, as “I can’t afford paying you and hundreds of others the minimum wage” is not enough of an excuse.
Of course, workers who fought for the minimum wage increase feel they are being unfairly targeted. But the reality is that what’s missing is some basic understanding of economics, which would help them realize that simply increasing the minimum wage by decree does nothing but limit the labor market, hurting the unskilled and the poor more than any other groups.
So, apparently, the reason we don't see much more people getting fired due to a minimum wage increase is because some law is protecting them from that, as you can see from what i've highlighted in bold and underlined. Employers are being blocked from firing employees that they can no longer afford to keep paying, so they must find other ways to maintain their profit margins which is to reduce hours or raise prices.
So it isn't the minimum wage law, specifically, that is causing this problem; it's this law protecting workers from being fired because their employers can no longer afford to keep paying them the new minimum wage that was raised by the minimum wage law that's causing the problem.
If that's the case, then all that does is make the problem even worse.
Eventually some businesses will stop hiring new employees and start investing in automation, and then, regardless if the minimum wage increase causes this or not, a minimum wage increase certainly won't fix the problem, and it will be pointless to raise the minimum wage by then, since those people won't have a job anyways, and neither will new young people entering the job market.