Getting a raise can be great, but not for those who lose their jobs. It is something similar to what Jacob Frey, the Mayor of Minneapolis, once said and it is exactly what’s happening in his city and many others around the United States.
Government officials, including Frey himself, have worked tirelessly to raise the minimum wage and cut the work week from 40 hours to 32. As a result, companies, both big and small, have been laying off hardworking Americans by the thousands. And there will be many more in the near future.

The conversation surrounding minimum wage has been happening for decades, with government officials in the United States (and most other countries) arguing about which dollar amount is fair for both employees and employers. Currently, the national minimum wage in the USA is $7.25 per hour; however, each state has the right to set its own minimum so they vary significantly. California’s minimum is $16, except for fast food workers who make $20, Washington state’s minimum is $16.28, and South Carolina’s minimum is $7.25.

Many state officials are fighting to increase the minimum wage, but it’s important to understand that this decision has merits and demerits. The advantage is that many Americans who cannot afford the ever-increasing cost of living can finally buy a home, save money, and invest. However, the disadvantage is that increasing labor costs could be detrimental to companies and could lead to much larger problems within the economy.

One of the most basic economic theories is that the more resources a company spends on designing, producing, and selling a product, the more it must charge for it. By increasing labor costs, companies will have to spend more money on staff than ever before, which will reflect on their price tags. This means that while millions of Americans will make slightly more per hour, everything they want to buy will be more expensive, too.

Some companies may be able to survive by slightly increasing their products prices to offset labor costs, but others will have to resort to more drastic measures to stay afloat. They might choose layoffs, as they are one of the most common ways to deal with the problem. Layoffs in the USA are already at an all-time high, but as the minimum wage increases across more states, the nation will likely have more unemployed residents than it has ever had in centuries.

In the past, companies could cut back on staff but not eliminate entire jobs, as at least a few people were needed in each position. However, things have changed, and that is no longer the case. Thanks to progress in artificial intelligence, computers, software, and even actual robots can now completely replace human beings. 

Many big corporations have decided to start investing in AI to prepare for the constantly growing cost of labor. Several forms of AI are already in use around the country, from kiosks instead of clerks to self-checkout counters. 

For those corporations that either don’t want to or can’t invest in AI and don’t want to increase their prices for consumers, there will be little to do except leave states that enforce a significant jump in the minimum wage. Rideshare companies Uber and Lyft have already threatened to abandon Minneapolis because the city council applied the minimum wage to its drivers. And in California, many fast food chains may have to close up some of their stores due to Gov. Gavin Newsom’s new law enforcing a $20 per hour minimum for their workers.

Vermont Senator Bernie Sanders has proposed another plan that many think is potentially more dangerous in the long run than increasing the minimum wage. Sen. Sanders believes that the country as a whole would benefit greatly from a nationwide adjustment to a 32-hour work week. However, he argues that companies will have to continue paying the same salaries as they were for 40-hour weeks.

According to Sanders, current technologies, including AI, should ensure that companies can maintain their productivity level while giving their employees an extra day off. Therefore, it should not be hard to pay them the same amount of money, even if they work eight hours less. Additionally, Sanders argues that companies aren’t likely to notice any real downturn in profits or productivity. In fact, he believes both may improve, as several studies report that employees were happier and more productive with an extra day off. Some companies even saw an increase in profits with the new model.

The idea works in theory for companies whose employees work almost exclusively on computers, but it would be very detrimental to manufacturing plants and other similar businesses. Many are arguing against it, saying that almost every company, manufacturing and otherwise, would have to hire more workers to maintain productivity and profits. This would cost them substantially more and significantly increase prices across board for almost every American consumer.

The chief economist at First Trust Advisors told USA Today, “The government seems stuck on this way of fixing something that doesn’t need to be fixed. It messes up the marketplace, and businesses attempt to find a way around it because these are not market-based wages – and today, with robotics and computers, they can. So it ends up hurting people.”
The debates over raising the minimum wage and implementing a 32-hour workweek have only just begun. However, no matter what happens, America’s workforce will look very different in the next few years.