The Trump administration’s tax overhaul prompted Wells Fargo and Fifth Third Bancorp to raise their minimum wages to $15 per hour. OceanFirst Financial Corp., a New Jersey bank, and three of the biggest banks in Hawaii—The Bank of Hawaii and the First Hawaiian Bank and Territorial Savings Bank—pledged to raise their minimum wages to $15 per hour too. Both AT&T and Comcast also promised to pay a $1,000 bonus to each of their U.S. employees, and Indiana-based First Farmers Bank and Trust also announced employee bonuses, wage increases, and community investment.
Each of these companies demonstrate how lawmakers can incentivize higher wages instead of universally mandating them. In fact, companies like Walmart, Target, and McDonalds show that voluntarily raising employee wages is routine. And data agree. Economists from Miami and Trinity Universities have documented that most minimum wage employees earn a raise within 1-12 months on the job. And only two percent of the hourly workforce was paid the federal minimum wage by 2006.
But Seattle realized too late that government intervention is unnecessary for companies to pay higher wages. A team of city-funded economists at the University of Washington found that Seattle’s $15 minimum wage mandate had caused employee pay to decrease.
These findings aren’t surprising. When businesses with razor-thin profit margins can’t offset the labor cost increase with higher prices, they resort to offsetting these costs by reducing work hours. When employers have the freedom to manage their businesses, less-skilled workers benefit. For these reasons, most economists oppose mandating higher minimum wages–particularly at the $15 level.
Lawmakers should avoid forcing employers to pay higher wages which inevitably costs employees their jobs. Instead, both business owners and employees benefit when legislators create incentives for employers to raise wages on their own.