Minimum Wage should not increase to $15.

P1: Corporate Income v Employer's IncomeA) Large Corporations. A common misconception regarding the costs of Minimum Wage is that it's paid for by the corporations. McDonald's earns around $28 bn a year [1]. However, only $5.8 bn of this is profit. A lot at first, but McDonald's has 440,000 employees earning $9 an hour, a national average of 1,789 hours a year [2]. This would cost McDonald's upwards of $4.72 bn a year. Costing McDonald's over 80% of their profits. The problem starts with the employer. The Employer is not the McDonald's company, but instead the franchise owner. Over 80% of their restaurants of privately owned franchises [3]. Whereas the Company earns high profit margins, independent restaurants average 2.4% [4]. A local McDonald's averages $800,000 (based on total revenue / outlets) and an average profit of $20,000 a year. The remaining profit is strictly corporate side. Based on this, and assuming the outlet has 15 workers [5](my place of work in a rural location consists of 27,) it would cost the outlet over $150,000. This becomes a large issue. Independent franchises can not afford to pay doubled wages. and corporate can not afford to make up the difference for their franchises. This leads into P3: Stock Value. B) Small businesses. The next issue would be the cost to local businesses that run separate of a franchise. Profit Margins aren't much higher. The highest profit margins were for Limited Service establishments, at 6% [6]. To reuse the McDonald's estimate, $48,000. Still well under the $150,000 cost for just 15 employees [7]. Most establishments can not afford the increase in cost, and will surely go under, hire employees, or raise costs (leading to going under). New establishments have a 60% chance of going under in the first three years [8]. This number would skyrocket under increased costs and prices. This leads into a major issue. Ripple effect. While small increases may have small ripples that heal over time (regardless of if it leaves an economic scar), a sudden increase to $15 an hour, even over five years, an increase 15x larger than most any other increase prior, will leave a massive ripple that may not heal. A massive increase in failure rates in new restaurants would eliminate industry growth, and the elimination of rural and independent restaurants that can't afford to raise prices 35% to make up the cost while maintaining the same profit margins. For Franchises, with a profit margin 1/3rd of that, they would have to raise prices by 71%. The Dollar Menu would have to be removed to keep business alive. This is based on wages taking up 35% of restaurant costs [9]. Restaurants make up 18% of all Minimum Wage workers, around 3,750,000 workers [10]. The industry as a whole employs 10% of the total US Workforce, and is set to create over 1.4 million new jobs within a decade [11]. Risking this industry would damage 14+ million jobs and wreck the Minimum Wage demographic. The industry makes up over 4% of the US GDP. This is just one of the many Minimum Wage industries that would get crippled. Supermarkets, like Walmart and K-Mart, manage profit margins between 1 - 2% [12]. They would have to raise prices incredible sums to keep afloat. Most in rural regions would go under, as they don't have the customer base to risk. Another major industry at risk is the Gas Station industry. Gas Stations run on minimum wage, and they only earn pennies per dollar. $50 in gas can equal $1.20 in profit [13]. Most profit is from the actual store [14], where prices are already too high. Profit margins for gas stations are 1.7% [15]. .. Any Gas Station that's open 24 hours a day will suffer the worse. Midnight hours would become profitless. This is a dangerous industry to hit hard. More will be discussed in P3. P2: Average Annual Wages. Con must assume that increasing Minimum Wage reduces poverty and increases wages. If it does increase the wages of the entirety of Minimum Wage workers, we'd see a notable increase in annual wages. Instead we see the opposite. As Minimum Wage goes down (based on 2013 USD standard)[16], the average Income of the US goes up [17]. This may not imply lower minimum wages lead to higher incomes, but it does imply that increasing the Minimum Wage does nothing for increasing the annual wages. If higher Minimum Wages led to a positive ripple effect, we should see this. .. be it from raising the pay of everyone increasing, or the increase in the economy. Another look into the issue of correlation leads us to measuring the actual increases in the wage along side GDP growth [18]. For Con's case to stand, we MUST see a positive effect on GDP growth. In my chart, red lines show the moment of increase in the Minimum Wage. Of the nine increases, only two see an economic growth follow. The first was after WWII, when millions of high earning US Soldiers returned home. And the second, around 1978, saw rocky growth at best. Economic Growth has, otherwise, never followed an increase in Minimum Wage. For Con's case to be true, there must be a positive ripple effect. If anything, the GDP decreases after practically all Minimum Wage increases. Again, while not implying the Minimun Wage was to blame, it does defy the logic Con must establish. P3: Stock Values. Companies stock would become a huge issue if profits disappear, prices go up without potential new return, or investors get scared. If McDonald's suddenly had it's franchises paying out $4.8 bn more a year in wage, it would cripple their stock. While most companies stock can survive a $0.25 increase, a $7.50 increase is well beyond the safe mark. Walmart has a market cap of $205.5 bn [19]. Having to double the paychecks of each of their employees would cost upwards of $15 bn. This would eliminate all of Walmart's profits. Since we know the individual profit margins of the individual shops are lower than the overall corporate profit margins, most Walmart shops would have plummeting profit margins, and the stock of the overall company would drop entirely. Bad, especially since their stock has dropped over 30% in the last year, and most companies are struggling to readjust in a post-recession era. But this isn't a Walmart issue. .. McDonald's has seen incredibly large sales declines in the past few years. In fact, McDonald's saw larger declines than they expected [20]. This, despite all the efforts put into promoting the franchise recently. This issue is hitting much of the Fast Food industry. Subway is seeing the largest decline [21]. Sales for the industry has dropped due to public awareness, but mostly the efficiency of better quality preserved foods that can be prepared in minutes without driving [22, 23]. All this taken into account, the stocks of minimum wage employers is destined only to fail, along with the companies themselves. P4: Effect on Employees. Most Economists have a fairly good idea that increasing the Minimum Wage would lead to a reduction in employment, or at least lead to a slowdown in future employment. One popular study done by the NATIONAL BUREAU OF ECONOMIC RESEARCH claimed that every 1 percent increase in average wages is associated with a 0.12% reduction in employment [24]. The increase is associated with as much as a 0.92% decrease in counties with lower average wages. By such measurements, a 100% increase in minimum wage would lead to a 12% reduction in employment. While obviously an extreme, even a 6% reduction would be crippling to the US economy. Counties facing lower average wages would face major recessions (as the highest possible reduction in employment is 92%. Obviously an extreme, but again, even a fourth the amount would be significant. )The increase in wages, if not outweighed by a reduction in hours, would be outweighed by unemployment and an economic downturn. Another study by David Neumark found that minimum wages correlated (with controls in place to remove outside variables) with teenage job elasticity of -0.3 [25]. Meaning the demand of teenagers in the job market was reduced as prices increased. In basic terms, demand went down as prices went up. It's a basic principle in economics that when you need less people to buy a product, you raise the prices. Everything is a product. This is why when applying for a job, even at an establishment like McDonald's (where pay starts around $9 an hour), you write down Minimum Wage for the desired wage. Conclusion:Most fast food companies are not in a position to pay doubled wages. They especially can't afford it when we take into account who is paying. Minimum Wage does not correlate with higher GDP growth or higher paychecks. Minimum Wage does, however, lead to higher amounts of job reduction and would cripple the stock values of major employers who are facing slowing business. Minimum Wage should not be doubled. Sources: . http://pasted.co...