Should the Federal Minimum Wage Be $15? Consider the Real Impact

Estimated Reading Time: 6 minutes. In this post, we will cover the impacts of the $15 federal minimum wage.

The idea of raising the federal minimum wage to $15 per hour often sounds appealing—especially to those earning minimum wage. But behind the politics and promises lie serious implications for employers, especially small and mid-size businesses. As an HR leader, understanding the real consequences of this shift is critical. Your compensation planning committee needs data, strategy, and foresight—not surprises. MorganHR helps companies prepare for compensation changes before legislation demands it.

Key Takeaways

• Raising the federal minimum wage to $15/hour could reshape the job market and pricing strategies.

• Low-skill workers may face job loss due to automation and outsourcing.

• Wage compression can create ripple effects across pay structures.

• Cost-of-living differences across regions challenge the idea of a uniform federal minimum wage.

• HR teams should reevaluate their compensation philosophy and tools now—not later.

Why Compensation Planning Starts With the Job, Not the Person

One key principle in compensation planning is this: you pay for the job, not the person. Companies set wages based on the value of the role, not who fills it. A 100% increase in the minimum wage forces businesses to ask: is the work of bagging groceries or taking orders worth $15 per hour—regardless of the employee?

For many small businesses, the answer is no. This disconnect could lead to either a reduction in staff or elimination of the role altogether through automation or offshoring.

Callout for HR Leaders:
Before adjusting wages, use your salary bands and job documentation to reassess job value and internal equity. Don’t wait for legislation to decide your compensation strategy.

Game Theory in the Workplace: Raise Prices or Cut Staff?

Companies reacting to wage increases face two basic options:

1. Raise Prices: This can offset payroll costs but risks pricing out customers—especially if competitors choose to maintain lower costs.

2. Cut Payroll Expenses: This could mean fewer jobs, stricter hiring standards, or greater use of automation.

Either choice comes with trade-offs. And when competitors choose opposing strategies, the result can hurt both the business and its workforce.

Real-world example:
Restaurants are increasingly replacing cashiers with kiosks or app-based ordering systems—a shift accelerated by the pandemic and now driven further by wage pressure.

The Domino Effect: Wage Compression and Pay Equity

If entry-level workers suddenly earn $15/hour, what about employees currently earning $13 or $16? To maintain compensation integrity, companies must adjust wages across multiple levels—creating wage compression and budget strain.

Wage increases for one tier ripple through the structure, potentially undermining merit-based raises and promotional incentives.

Action Step:
Audit your pay structure to anticipate where compression could occur. Use tools like SimplyMerit to model the impact across your organization.

Not All Zip Codes Are Created Equal: Regional Cost of Living

The cost to live in San Francisco isn’t remotely comparable to a small town in the Midwest. A federally mandated wage floor doesn’t consider these geographic disparities. That’s why states and localities should retain control over minimum wage laws—so they reflect economic realities on the ground.

Uniform policy leads to unintended consequences:

• Urban areas might raise wages again, increasing their cost of living.

• Rural areas might see migration pressure, labor market shifts, or business closures.

What’s the End Game? Who Really Benefits?

While the intent of raising the minimum wage is to improve worker well-being, outcomes may vary:

• Some low-skill jobs will be lost entirely.

• Others will become harder to obtain as standards rise.

• Businesses may struggle to keep compensation systems aligned.

And yes—higher average incomes lead to increased tax revenue, which may also motivate policymakers.

MorganHR’s Perspective: Be Ready Before the Questions Are Asked

At MorganHR, we believe in proactive compensation planning. Whether minimum wage increases pass or not, now is the time to review your compensation philosophy, job documentation, and pay structures.

Tools and Services We Offer:

• Compensation planning software (SimplyMerit)

• Job description and title alignment

• Wage compression analysis

• Market benchmarking and salary banding