A minimum wage is a decision a society makes, that says "this is the minimum market rate for a human that we consider non-exploitive", it's not an economic decision made to maximize GDP or profit. If a company can't afford to operate in a way that's non-exploitive then it needs to reconfigure or die out, because it doesn't belong in your society.
People constantly argue for the rights of businesses which pay incredibly poorly, as if that is effecting mom and pop shops which are by and large already closed and gone, and when they were around ended up paying a bit more. Maybe a community is better when there’s a collection of local businesses moving money locally instead of a big nowhere-place off the turnpike paying slave wages and moving money back to corporate HQ? America’s business climate is pretty sick compared to so much of the world.
How is this bad?
First, inefficient employers like McDonald's have an entrenched position in the industry because of their massive scale and their real estate holdings. A new entrant in the market already has an uphill battle - if they don't want to rely on government subsidies (e.g., because they want to attract employees who would rather be paid directly for their work), their task is even harder.
A free market in the sense Adam Smith meant it - not a free-for-all, but free to enter - would treat it as a policy goal that new companies would have a fair shot at competing.
I'd understand the argument that government welfare and a low minimum wage are important to support new entrants, by making it possible for them to compete against the entrenched companies. But that's not what's happening; it's the entrenched companies that are effective beneficiaries of these policies (cf. https://www.cnbc.com/2020/11/19/walmart-and-mcdonalds-among-...).
Second, passing the costs along to the consumer along with raising wages has the effect of increasing the purchasing power of low-income consumers. If the minimum wage goes from X to 2X, which causes the cost of items at McDonald's or Wal-Mart to go from Y to 2Y (which it won't, because labor costs aren't the entire costs, but for the sake of argument assume they are), then people being paid the minimum wage are in basically the same position for their everyday purchases: they get twice as much money, but they spend twice as much money. But they've also got larger expenditures - renting or buying a home, buying a car, paying medical bills, etc. The cost of emergency surgery isn't going to double just because the minimum wage goes up (even though much more of the cost is labor) - surgeons are paid way above the minimum wage already.
What this means is that people being paid a high minimum wage are equally able to live their ordinary lives, because they can afford the increased cost of goods made by other minimum-wage employees, but they are more able to make expenditures that improve their lives (e.g., more able to deal with medical issues before an emergency) - and more able to make purchases that stimulate the economy. Instead of buying N hamburgers a year and a car that costs Z which they use for five years, they can now buy the same N hamburgers a year and a car that costs 1.2Z.
As long as government policy continues to enable both wages and prices remaining low, the economy is stuck.
(It does mean that the relative purchasing power of rich consumers goes down - they can buy the same number of vacation homes, but they can't buy as many McDonald's hamburgers - but that hardly seems like a concern. You can only eat so many hamburgers, and they're probably not buying very many hamburgers from McDonald's anyway.)
If the state chooses to offer benefits, great! But the state shouldn’t blame businesses having to offer those benefits.
If the state wants people to have more money than the market provides, the state can simply increase benefits to that level.
Wage subsidies are supported by both conservative and liberal economists.
I am not saying it's a net good or bad for the economy by the way, I don't think I am qualified for that. But I can tell be pretty confident that exploitive wages are bad for employees and good for employers, a balance for which we have a lever to adjust.
For example, my wife is an administrative assistant for an NGO. She makes about average for an administrative assistant, but that makes her one of the highest paid employees.
Some of the employees are true believers and donate much of their salary back. Others are broke, and can hardly make it by.
Most are women with husbands who make the real money.
I know for a fact that the “higher ups” get paid less than the lower end. But many are retired lawyers and bankers. They also have seats on the board.
Some of the people who work there do so at great personal cost. The kids just out of college can barely eat.
Is this exploitive?
If my wife was the primary breadwinner, it sure as heck would be.
But everyone there could easily make much, much more in a heartbeat.
No one is working at McDonalds out of the kindness of their heart. For my partner's work, they simply have a delineation between volunteer participation and worked hours, and it makes it very clear which hours you're paid for and which you aren't. They have "working bees" and "volunteer weekends" and so on, and people are happy to sign up for them.
Similarly, theatres (as in performance art not cinema) are often for-profit but still quite heavily volunteer reliant, because people want to support the arts and the theatres wouldn't run without them they can make it work. If a petrol station tried to do that, no one would sign up for the volunteer program, and "the market" has happily chosen which businesses can run with volunteered labour or not.
The CIA is able to recruit people for the Clandestine Service who could easily make millions at a bank. They get paid about 90k a year, for more work.
Why? Because they get to be freaking secret agents!
Are they being exploited? I know some folks who used to work for intelligence agencies. They seem to think so. The “secret agent” factor is bullshit. They have to live in high cost of living areas. And 99% of the time the job sucks.
Mostly just office work.
I certainly see something exploitive about that … offering one thing and not giving it.
The military is famous for that shit.
I’m sure there are other industries that do the same. Hollywood comes to mind. So does programming computer games. Etc.
A great example in your favour is pilots working for minimum wage because people just want to be pilots so bad. But these are really exceptions, the vast majority of people just want to eat and make rent with any job and they're not able to. Companies know they've got no choice but to work at non-livable wages, so that's the most prominent exploitation around minimum wage that we're trying to solve by raising it. Make it so people in poverty don't have to trade there lives in exchange for money that can't even sustain their position in poverty.
My own experience is that failing firms pay more. They can’t offer security, and tend to lay off as many people as possible. The layoffs leave the firm top-heavy. In order to recruit new staff they have to pay more. Who wants to be VP of a failing company?
Regarding propping them up, I don’t see how making up the difference between a given wage and the amount necessary to live a decent life is propping up the company.
I’m very much in favor of minimum wage laws. But I don’t see them as government propping up failing companies.
They should enforce things like minimum wage because it's doing welfare and social support, but they have the power regardless.
Before the (significant) wage subsidy, they used to almost always be paid under the table. Now they earn a proper salary with all extra security that entails.