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What Should Be Done About Minimum Wage?

|Includes:McDonald's Corporation (MCD)

Minimum wage has long been a touchy topic between Democrats and Republicans. Mitt Romney, Rick Santorum and Tim Pawlenty made news today when they criticized GOP senators for not helping pass a Democrat-crafted bill to raise the minimum wage to $10.10.

I guess it would be ironic to point out that none of the aforementioned gentlemen are planning on running for president in 2016, but let's not get too much into political banter. Rather, let's talk about what minimum wage is going to do to the economy, because it seems more inevitable than ever before.

According to the Congressional Budget Office, raising the minimum wage would effectually reduce employment in the United States, obviously because employers are going to try to make due with less people if they have to pay them more. There's no doubt we would also see an increase in prices, especially for our favorite fast-food restaurants.

Because what most people don't understand is that most of these places are small businesses, franchises that don't share in the massive profits the main corporation enjoys. For example, out of the 14,000 McDonald's in the U.S., only 3,000 are actually run by McDonald's. So in order to keep franchisees happy, the corporate giant will have to change the pricing structure-which people, in turn, will complain about.

At the same time, though, putting more money in workers' pockets will be putting money into the hands of those who actually spend in the real economy, which can have a positive effect on the economic recovery. According to Dairy Queen CEO John Gainor, it also drastically decreases turnover and training costs.

Personally, I've never been paid minimum wage. My first job as a 14-year old middle school custodian paid me $0.35 more than the federal minimum. That being said, I can't properly empathize with those people who are working 40 hours a week and still living in poverty. That being said, I lean more toward increasing it, preferably at the expense of ridiculously high-salaried CEOs.

What are your thoughts?

Stocks: MCD