Raising the Minimum Wage


Armstrong Economics Blog/Economics Re-Posted Feb 23, 2021 by Martin Armstrong

The Democrats stuffed into the $1.9 trillion stimulus package a hike in the minimum wage from $7.25 for covered nonexempt employees to $15. Many states also have minimum wage laws. In cases where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages.

In Florida, I voted for a hike in the minimum wage over the next six years which will increase gradually to $15 an hour. On November 3, 2020, over 60% of Floridian voters approved Amendment 2, which increases the minimum wage and amends Florida’s Constitution. Under the new mandate, Florida’s minimum wage rate (currently, $8.56) will increase to $10 an hour in September 2021. The minimum wage then will increase by $1 each year until it reaches $15 an hour in 2026. The minimum wage rate applies to all public and private sector employers, regardless of size or number of employees.

Employers must use the following hourly minimum wage schedule for non-tipped employees:

  • Through December 31, 2020 – $8.56
  • January 1, 2021 – $8.65
  • September 30, 2021 – $10.00
  • September 30, 2022 – $11.00
  • September 30, 2023 – $12.00
  • September 30, 2024 – $13.00
  • September 30, 2025 – $14.00
  • September 30, 2026 – $15.00

I voted for it because by 2026 we should see a rise in inflation due to shortages. However, the Federal bill increases the minimum wage to $9.50 an hour as soon as the bill is passed, raising to $11.00 an hour one year later, $12.50 two years later, $14.00 three years later, and $15.00 an hour beginning the fourth year following passage of the legislation.

While I am generally opposed to increasing the minimum wage because that has traditionally been the entry-level for kids in school, I would prefer to see the minimum wage qualified by age. Raising the minimum wage for part-time students will have an adverse impact on employment. Because of all of the extra-costs for an employer and regulations that politicians think will protect workers, this will merely increase the incentive to replace jobs with self-service screens and robots.

Eliminating employees is a dramatic cost reduction up to as much as 70% for most service-oriented businesses especially in hospitality. The danger of these lockdowns, masks, and social-distancing is that it is not merely breaking the bonds of human interaction, we have heard from corporate clients in hospitality that the prolonged lockdown crisis is shifting the business model toward robots rapidly because they cannot afford to pay staff to sit around for nothing.

We held our World Economic Conference in Orlando at the Hilton which is usually jammed-packed. This time, we had the hotel to ourselves and they were so ecstatic that we were even there. The hotel was running at 5% capacity and all but one restaurant was close. Additionally, there was no room service.

If we do not appreciate that rising healthcare costs are seriously impacting small businesses and their ability to hire staff, the trend toward self-service screens, internet-like ordering, and robots will wipe out entry-level jobs. This is such a serious issue that politicians should not be allowed to play with just to win votes and they think it sounds good. Almost 80% of the economy today is service-oriented. Nobody can destroy an economy like corrupt politicians. Increasing the minimum wage should really be differentiated by age as to not deter the youth from getting their first job. It must be looked at as a whole with all the other regulations and costs. When we were advising Japanese companies who wanted to open up in Europe, those in manufacture we put in Britain because the cost associated with employees were 40% less than in Germany back then. We make strategic decisions globally based upon all the inputs – not just one to put on a show.

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