Arguments to Increase the US Minimum Wage

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8th Feb 2020 Economics Reference this

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A rallying cry for increasing the minimum wage has rung out across the nation with workers demanding for the federal government to rethink the fifteen-dollar minimum wage. The United States has had a federal minimum wage since 1938 and has only altered it a few times since it was first created. The minimum wage is the lowest hourly wage that employers, by law, are permitted to pay their employees. In the past, Congress has been uncompromising towards bills with the intent to alter the minimum wage. The last successful attempt at increasing the minimum wage occurred in 2009, which raised the minimum wage to $7.25 an hour by July 24, 2009: the first increase in ten years (Gilbert). Before 2009, the last time the minimum wage was untouched for ten years was 1981 to 1990. More recently, in 2014, a bill was moved through Congress to increase the federal minimum wage to $10.10, but this bill was declined. In today’s current economy, protests have become more prevalent because people want to see change— especially low-wage workers when it comes to the minimum wage policy. Due to the longstanding, unbudgeable minimum wage, people have begun the Fight for $15, urging the government to strongly consider an increased minimum wage across the country.

The Fight for $15 is not just a fight to increase wages, but to also increase workers’ standard of living. A higher minimum wage will create positive differences in the lives of America’s low-wage workers and boost economic activity. Increasing the federal minimum wage will in turn allow for increases in consumer spending, worker productivity, and the standard of living. Studies conducted by major economists, including Nobel laureate George Akerlof of Georgetown University, found that employee work ethic increases when employees believe they are paid a fair wage (“Raising”). Higher wages have also shown to lead to increases in productivity resulting from decreases in “decision fatigue” on the job. Not only does this minimum wage increase worker productivity, it also decreases the amount of employee turnovers. A study by Arin Dube, William Lester, and Michael Reich in 2012 found that increases in the minimum wage can reduce turnovers significantly, which leads to savings in turnover costs for the businesses (“Raising”). Furthermore, when wages increase, workers have more spending power as consumers, which creates greater demand for goods and services: “A study by Doug Hall and David Cooper estimated that a $2.55 increase in the minimum wage would increase the earnings of low-wage workers by $40 billion and result in a significant increase in GDP and employment” (“Raising”). Low-wage workers are specifically impacted from an increase in the minimum wage because they receive more money that they can spend or save—both resulting in boosting the economy. If the bill is passed in Congress to increase the minimum wage to $15 in the United States, the economy can benefit greatly.

Following an increase to $15 as the federal minimum wage, poverty levels will display a decline, as an increased minimum wage becomes more livable and shows movement towards equality. In today’s economy, a parent working full-time at the minimum wage, supporting two children is below the federal poverty line because policymakers have failed to preserve the basic labor standard. In 1968, the minimum wage was sufficient to keep a family of three out of poverty, but not a family of four, even when the minimum wage was at its highest in that time period. The Raise the Wage Act would, for the first time ever, bring full-time minimum-wage earnings above the poverty line for a family of four in today’s economy (Cooper). According to the Economic Policy Institute, an increase in the minimum wage would lift approximately 4.5 million people out of poverty (“Raising”). Recently, a released analysis of minimum wage increases concluded that for every 10 percent increase in the federal minimum wage, in the long run, the poverty rate is expected to decrease by 5.3 percent (Cooper). Not only would an increase of the minimum wage reduce poverty levels, it will also begin to close the wage gaps between races. Statistics have shown that if there is an increase in the minimum wage of $15 by 2024, then the percent of African American workers who would benefit is 40.1 percent, the percent of Hispanic workers who would benefit is 33.5 percent, and the percent of Asian and other races or ethnicities workers who would benefit is 22.4 percent (Cooper). Although “more than one-in-four (26.5 percent) white, non-Hispanic workers would get a raise,” other races and ethnicities will benefit as well (Cooper). Taking action to raise the minimum wage to $15 is a step towards wage equality throughout the United States.

Big businesses and larger corporations would be able to support an increased minimum wage, and in turn can help smaller businesses adapt to the wage change. Executives of big businesses support a $15 minimum wage because a survey conducted by Republican pollster Frank Luntz found that 80 percent of executives of larger business support increasing the minimum wage (“Raising”). In addition to big businesses, some small businesses also support an increased minimum wage because small businesses with one or few owners typically have fewer workers to pay: “A national poll of small business owners conducted by the American Sustainable Business Council found that 60 percent of small business owners support increasing the federal minimum wage” (“Raising”). A larger company can absorb costs, including workers’ pay in a way that a smaller business may be unable to, but small businesses are just as capable with managing increases in the minimum wage if they account for it in their business costs (DePillis). Another factor that can help businesses is the economy of the area they are in. For example, in the United States, the city of Seattle has a strong economy and a hot labor market, so if the minimum wage is increased, companies will be able to handle it without losing value in their business (Scott). Both big and small businesses can alter their ways of business to account for an increase to $15 of the minimum wage.

Although increasing the minimum wage shows various benefits to boosting all aspects of the economy, some argue that an increase in the minimum wage to $15 will fuel inflation, resulting in erased benefits for workers following the increase. Inflation is influenced by multiple different factors other than wages including demand-pull and cost-push inflation, which both result in driving prices up. Economists argue that with an increase in wages, an increase in prices is likely to follow. However, the FAO issued a report in September approximating that the increase in the minimum wage will raise the incomes of about 1.6 million workers (Nuttall). Also, estimates have been made that a higher minimum wage will increase total labor income, after price inflation is accounted for, by 1.3 per cent by the year 2019, showing inflation will not eliminate the benefits from the wage increase (Nuttall). The correlation between wage increases and inflation is weak because there are low interest rates in the current economy. Inflation serves as one potential negative impact from increasing the minimum wage, but studies have proven that it has little influence.

The Fight for $15 sparked unity between low-wage workers demanding change from the unpersuadable Congressmen to increase the current federal minimum wage. Throughout the United States, the minimum wage is different for each state, with a range of $2 in Oklahoma to $11.50 in Washington (Thomas). The inflexible federal minimum wage of $7.25 caused states to take their own actions regarding the minimum wage. Currently, twenty-nine states, including Guam, the Virgin Islands, and Washington D.C., have their minimum wage set above the federal one, and thirteen states have their minimum wage set at $10 or more (Thomas). Change in the minimum wage is happening slowly throughout the states, but should happen at the federal level, creating an equal wages across the country. The Fight for $15 started as small protests in some parts of the country with low-wage workers demanding change, but now it is a powerful movement that has caught the attention of the whole country. The Fight for $15 is not just a fight for an increased minimum wage, but a fight for life, equality, and change.

Works Cited

  • Cooper, David. “Raising the Minimum Wage to $15 by 2024 Would Lift Wages for 41 Million American Workers.” Economic Policy Institue, 26 Apr. 2018, www.epi.org/publication/15-by-2024-would-lift-wages-for-41-million/. Accessed 30 May 2019.
  • DePillis, Lydia. “Why Big Business Is Giving up Its Fight against a Higher Minimum Wage.” CNN Business, 17 Apr. 2019, www.cnn.com/2019/04/17/economy/minimum-wage-raise/index.html. Accessed 30 May 2019.
  • Gilbert, Geoffrey. “Minimum Wage and Inequality.” Issues: Understanding Controversy and Society, ABC-CLIO, 2019, issues.abc-clio.com/Search/Display/1506501. Accessed 27 May 2019.
  • Nuttall, Jeremy J. “Experts Weigh in on Five Arguments against a $15 Minimum Wage.” The Tyee, 12 Jan. 2018, Labour and Industry sec., thetyee.ca/News/2018/01/12/Experts-Weigh-In-Five-Arguments-Against-Min-Wage/.
  • “Raising the Minimum Wage: Good for Workers, Businesses, and the Economy.” Education and Labor Committee, edlabor.house.gov/imo/media/doc/FactSheet-RaisingTheMinimumWageIsGoodForWorkers,Businesses,andTheEconomy-FINAL.pdf. Accessed 30 May 2019.
  • Scott, Dylan. “How New Research Is Shaking up the Debate about a $15 Minimum Wage.” Vox, www.vox.com/2019/5/8/18528098/national-federal-minimum-wage-fight-for-15.
  • Thomas, Lauren. “Minimum Wage.” Issues: Understanding Controversy and Society, ABC-CLIO, 2019, issues.abc-clio.com/Search/Display/985160. Accessed 27 May 2019.

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