This article originally appeared in the Washington Post on April 3, 2019.
House Democrats are pushing the Raise the Wage Act, which would increase the federal minimum wage from $7.25 to $15 an hour by 2024. The bill promises to reignite the debate over whether government mandates or economic growth are the most effective means to raise workers’ wages. But the discussion may be superfluous, because so many major employers across the country are already raising wages and the paychecks of lower-income Americans are showing significant gains.
While there is some dispute in the economic literature regarding the employment effects of minimum-wage increases, my view is informed by my experience as chief executive of CKE Restaurants for more than 17 years, running a business that employed tens of thousands of employees at every wage level.
I found that when government artificially increases wages above the going market rate, employers react by reducing labor costs so they can stay in business. That generally means reducing the number of employees and hours worked (and contemplating the benefits of automation). I also found that during periods without meaningful job growth, employees are in the unenviable position of competing against one another for the available jobs. When employees compete for jobs, wages stagnate or decline, because companies have little incentive to increase them.