The minimum wage is currently $7.25, but the Democrats are trying to raise it to $15 as part of the new stimulus bill. 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 usually occurs anywhere from every three to seven years.
The purpose of the minimum wage is usually 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. It could be a downright disaster for small businesses that are affected by the pandemic because increased expenses at a time when sales are way down is a disastrous combination. After all, $7.25 to $15 is a huge jump. Even large companies (which aren’t, in theory, as strongly impacted by the raises) can run into trouble when wages jump because they may not be in a position to raise prices in fear 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, but 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. But if there’s any time when a short-lived economic boost will help, it’s now when the economic recovery this year and beyond is far from certain.
How do minimum wage increases affect those in poverty?
The ultimate question behind any debate on 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. A minimum wage increase only helps them buy another iPhone but does little to help those who actually need it.
And let’s not forget that our unemployment rate is already ultra-high due to the pandemic. Is this the right time to be forcing the fast-food restaurants and hospitality industry, where many of these minimum wage jobs are, to increase their payroll expenses significantly? I know a friend who owns a small hotel. He said he lost $600,000 last year on his investment because he wasn’t allowed to open during high season due to the state-imposed lockdown and he spent a ton on cleaning supplies and masks etc when they were allowed to open. His hotel was thriving before the pandemic but last time we talked, he didn’t know whether his business would survive this downturn. If more businesses struggle to make it, then all the bankruptcies will only increase the unemployment rate further. At the end of the day, people in poverty are going to be worst off no matter how high the minimum wage is if they don’t get to work at all.
Bottom Line
Some 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 businesses. But is it better instead to spend more on educational opportunities and skilled training so workers can qualify for higher-paying positions and careers instead of trying to support families on minimum-wage jobs?
If the initiative is successful, 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.
The latest stimulus package is finally taking shape and the minimum-wage add-on is a major sticking point.
What do you think? Should the minimum wage be raised? If so, is $15 the right amount?
{ read the comments below or add one }
The idiot Demorats are going no only bankrupt this country and send it down to the sewer, which they already are, but they are going to make it impossible for small businesses to hire because the minimum wage will be to high. These people know nothing about running a country. But hey, you people allowed the steal and now this is our new nightmare.
I remember when this debate started, one of the most compelling “justifications” (I use that term loosely) for raising the minimum wage was the fact that many employees earning such salaries were the primary and/or sole breadwinners in their family. Well, there’s the problem, people! Minimum wage jobs are meant to be entry level positions, for young people getting their feet wet in the workforce, or those who just want to earn some walking around money. They were NEVER meant to support a family.
Children are expensive. People need to resolve not to bring them into this world until they are married (or at least in a committed relationship), and emotionally and financially ready to provide them with a decent standard of living. That doesn’t have to be a 5,000′ sq mansion, designer clothes, nannies, and private schools, but it should at least be housing you’re not in constant danger of being evicted from, and enough food in the fridge so a jar of peanut butter doesn’t have to tide the kids over until your next payday. A minimum wage job won’t guarantee that, nor should it.
The answer is straight up no! Higher prices for services, food you name it. If you want to make a good wage go get a better job. It’s just that simple. $15.00 dollars an hour to hand me an order through the drive-thru window makes no sense. The Democrats are all in on this wage and that’s what is pressing because it gets them votes. They have no idea what the business owners have to do to compete. If you do your homework it does not benefit the economy it hurts it. Just my two cents.
As a former businessman who had 5 restaurants, I would say that minimum wage is paid to those who are still in school or who have no skills and therefore have little to offer. But in order to be fair, the minimum wage should be adjusted accordingly with the inflation rate. The politicians and the unions all demand increases because of inflation. So why not the average unskilled employee. What’s fair is fair. Whenever my costs would go up, I of course would have to increase the cost of my meals accordingly. The problem is when unions get greedy and demand obscene wage increases, that must be passed on to the customers. That is what happened in Detroit when an unskilled assembly line worker earned $75 an hour and the cost was passed on to the consumer. Detroit sold fewer and fewer cars. Now the high-paying jobs have been off-shored to 3rd world countries and thanks to the unions the middle class is rapidly becoming obsolete.
No to raising it. Two things: it drives up costs, which will in turn depress hiring, and people should think in terms of getting themselves out of minimum wage range all together, not relying on it.
Adele, you nailed it on the head. If you think about it, there is evidence today that young people can’t find jobs, because employers aren’t hiring. This is not good for today’s youth. Washing dishes, mowing lawns, and scrubbing floors were some of the best educations I have ever received. And kids today are just not getting it.
This article asks the wrong question. It is not whether the minimum wage should be raised, and if so, how much, but rather whether the minimum wage should exist at all.
Now as soon as I wrote that people will start imagining workers being exploited for $3 per hour. But the fact is, minimum wage is more likely to keep people earning very little money rather than freeing them up to challenge themselves to go make more. In other words, if there is no minimum wage, people will make critical decisions about their abilities to make money, what they are willing to work for, and how they can go earn more. They put their destiny in their hands, not the government bureaucrats.
I love free-market principles. A business needs someone to go do a job. A potential employee needs to make money. They come to terms. Why? Because time is money and things need to get done. This employee/employer “Thank you” “Thank you” relationship is a beautiful thing, and does more to raise people’s income than government intervention.
Don’t let the government dictate your lives people. Rise above (figuratively and monetarily). If my kids ever come to me and say, “Dad, I can make $7 an hour working at Walmart.” I am going to challenge them to double or even triple that. Who else can we work for? What business can we start?
One more side note: As a teacher, I finally, after 15 years, have started taking summers off. No summer school for this guy. $30 an hour is not enough. I don’t work for less than $40, and $50 an hour really gets me in the door. But I paid a price to get there. Two college degrees and National Board Certification and coaching soccer for 8 years, not to mention taking more classes and writing more checks than a teacher should have to. I didn’t count on the government to bring me money…I went out and blew it out of the water. We should be teaching our young future workers to do the same.