The minimum wage is currently $7.25, but many are pushing to have it raised to at least $9 — if not higher. The current minimum has been in effect since 2009, when it was raised from $6.55. There’s no definite timeline for minimum wage increases; the decision is made by Congress and can occur anywhere from every three to seven years.
The purpose of the minimum wage is twofold: to protect low-income workers from being exploited, and to keep up with the increased cost of living due to inflation.
Economic conservatives, however, are warning that another raise could actually hurt the employment rate while doing little to help the quality of life for those below the poverty line.
Minimum wage increases are always a controversial topic, so here’s what you need to know:
How do minimum wage increases affect businesses?
Whenever the minimum wage increases, businesses are forced to budget more for payroll. This, in turn, forces them to lay off workers, limit new hiring, and raise prices. The effect is particularly acute for small businesses that don’t have as much leeway in their budgets. Even large companies (which aren’t, in theory, as strongly impacted by the raises) are reluctant to raise their prices, because of the risk of losing business to their competitors.
People in favor of a minimum wage increase insist that larger companies are profiting too much at the expense of their workers, and should be willing to take a profit cut because it’s the right thing to do.
How do minimum wage increases affect the economy?
If businesses are forced to pay their workers more than they can afford, they’ll either stop hiring or lay off workers. This increases the unemployment rate AND makes it more difficult for the already unemployed to get a job.
Also, if prices rise because of a minimum wage increase, its purpose has been defeated. Not only are those who are making minimum wage forced to pay higher prices — everyone else’s cost of living increases, too.
On the other hand, wage increases are designed to stimulate the economy by allowing low-income workers to spend more money. If wage increases aren’t immediately affected by unemployment and price increases, we should see a sudden spike in economic growth. Conservatives warn that this is only short-lived and doesn’t really solve the problem or help the economy.
How do minimum wage increases affect those in poverty?
The ultimate question behind the minimum wage is whether or not it actually helps those it’s supposed to. Conservatives claim that only a very small percentage (less than 10%) of those in poverty actually benefit from a minimum wage increase. The problem, they say, is assuming that those who are making minimum wage are living independently. Most minimum wage workers, however, are in their late teens to twenties and still living at home — so a minimum wage increase does little to help those who actually need it.
Some still claim that greedy executives are to blame for their unwillingness to spend more on wages and open up hiring so unskilled workers can get jobs and better themselves. These minimum wage advocates are pushing for more government regulation of big business.
It’s also important to consider the need for more education opportunities and skilled training, so workers can qualify for higher-paying positions and careers instead of trying to support families on minimum-wage jobs.
In other words, decreasing the cost and increasing the accessibility of higher education and skilled trade training might be a more effective method of helping the unemployed and low-income workers.
While the minimum-wage debate continues, no definite moves for an increase are in sight.
What do you think — should the minimum wage be raised? If so, how much?