Earlier this week the Washington D.C. City Council voted unanimously to implement a $15 dollar minimum hourly wage. At $10.50 an hour, the nation’s capital already has a minimum wage that is higher than any of the fifty states. Following a future vote to approve the measure, the city will join other large cities such as San Francisco and Seattle in establishing a $15 minimum wage. The minimum wage was already scheduled to rise to $11.50 at the end of this year. After this increase the minimum wage would rise 70 cents a year until the year 2020.
Raising the minimum wage may lead to a loss of jobs in the hotels, restaurants and other service industries where low-wage jobs are commonplace. This is particularly relevant due to the fact that D.C’s proximity to Maryland and Virginia easily allows companies to start or relocate businesses in these states – all the while receiving business from the District. In fact, this is even more likely when one considers that in Virginia the minimum wage is only $7.25, creating an incentive for businesses to move across the Potomac.
These rapid wage increases will no doubt raise the cost of doing business in Washington D.C. This will have a variety of effects on how businesses operate in the District. First, some businesses would pass the rising cost of labor in the form of higher prices. While others may choose to hire less workers, hoping to do more with less. This could very well lead to less hiring for entry level positions as employers are less likely to take a chance by hiring those with little experience. This is pertinent to teenagers and college grads with limited work experience. In order to make up for the increase in the labor costs, businesses may choose to cut benefits to their employees in order to make up for the increase in the labor costs.
Washington D.C. is already faced with an unemployment rate of 6.4%, which is well above the national average. The increase in the minimum wage over the next few years has the potential to exacerbate this issue. The raising of the minimum wage in D.C. will cause a rise in prices, reduce entry level hiring, and has the potential to drive businesses to neighboring states. The reasons for raising the minimum wage are often tied to improving the lives of low-income earners, yet there are ample reasons to believe that it does just the opposite.