Pro
by Juliana Esteban
Without money, people experience undue hardship. On top of that, money can affect current prospects as well as future prospects. Some may claim that the poor need to work harder, but upward mobility is difficult without money [1]. Without money, people cannot access education, and without that, they cannot access a job. In particular, the college premium is at an all-time high [2]. Not to mention, physical labor is undervalued because of rising inequality [3].
The same is true for all fields of work that do not require post-secondary education. After all, these jobs are not easy. They require a different skill set but not necessarily less work. As discussed, this is where money influences success. Even with the same talents, people will not have the same outcome due to their upbringing.There are many possibilities, each with advantages and disadvantages, but one of the best ideas would be to increase the federal minimum wage to $15 per hour to improve welfare and equality.
In light of recent events, minimum wage is currently increasing in a couple of states, and even reached a high of $16 per hour in some areas of Washington [4]. As a result, people earn a living wage so that they have enough time and money to work, pay for bills, housing, food, and other necessary expenses for themselves and/or their families while being able to study or spend time with their families. Naturally, this amount varies by area, but the idea of a living wage is basic [5].
Unfortunately, this issue isn’t as simple as it seems. There’s greed, mistreatment, wage theft, and more in so many corporate areas. After all, if the minimum wage is raised, there exists the possibility of there being less job opportunities, since it can be argued that a minimum wage job is mostly for the experience. Changing economic standards requires morally sound judgements to ensure equity in the working environment [6].
Even though this perfect world doesn’t exist, there are ways to help make it better, starting by giving people the right to live a stable life.
Sources
Lu, M. (2020, September 2). How has social mobility in the U.S. changed in recent decades? World Economic Forum. https://www.weforum.org/agenda/2020/09/social-mobility-upwards-decline-usa-us-america-economics/#:~:text=For%20decades%2C%20a%20majority%20of,harder%20to%20make%20this%20ascent.
James, J. (2012). The College Wage Premium. Economic Commentary, 2012-10. https://doi.org/
1. Trends in income and wealth inequality. (2020, January 9). Pew Research Center’s Social & Demographic Trends Project; Pew Research Center’s Social & Demographic Trends Project. https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/
Wolters Kluwer Legal & Regulatory U.S. (2019, December 27). Workers in Majority of U.S. States to See an Increase in Minimum Wage in 2020. Prnewswire.com. https://www.prnewswire.com/news-releases/workers-in-majority-of-us-states-to-see-an-increase-in-minimum-wage-in-2020-300979588.html
Can a Family Survive on the U.S. Minimum Wage? (2021). Investopedia. https://www.investopedia.com/articles/personal-finance/022615/can-family-survive-us-minimum-wage.asp
Andrew Van Dam. (2021, March 3). Fewer Americans are earning less than $15 an hour, but Black and Hispanic women make up a bigger share of them. Washington Post; The Washington Post. https://www.washingtonpost.com/business/2021/03/03/15-minimum-wage-black-hispanic-women/
Con
by Aaron Lee
cbo-says
x
Introduced on January 26th, 2021, the Raise the Wage Act of 2021 aims to gradually raise the U.S. federal minimum wage from the current $7.25 per hour (as of July, 24th 2009) to $15 per hour by June 2025 [2]. Nevertheless, this is not without its consequences. In theory, the idea of increasing the minimum wage to $15 per hour may sound like a virtuous decision, but there are many inadvertent consequences that may result from said action; employers and employees, especially those of smaller businesses, could be negatively affected by its extra costs and outcomes. Not to mention, this is a hike during a pandemic—when the economy is already struggling.
In 2019, the Congressional Budget Office (CBO), a federal agency, conducted a study entitled “The Effects on Employment and Family Income of Increasing the Federal Minimum Wage.” Essentially, the agency studied the effects of raising the federal minimum wage (from the $7.25 per hour to $10, $12, and $15 per hour) on employment and family income by the year 2025. The study determined that increasing the minimum wage would increase earnings for millions of low-wage workers (an estimated 17 million people, raising families out of poverty). However, in this regard, 1.4 million Americans would lose their jobs [1]. Proponents will cite studies stating that minimum wage increases do not increase unemployment, but it is important to note that the studies only claim these effects for moderate increases; doubling the minimum wage from $7.25 to $15 per hour is not moderate. In a poll of prominent economists from IGM Chicago, only 14% of economists disagreed that an increase to $15 per hour would significantly reduce employment for low-wage workers [3]. This action could have drastic reverberations, especially affecting the individual.
Due to the increased payrolls and costs of raising the minimum wage, many companies would likely liquidate their businesses, and with the ever-growing industry of technology, machines could easily replace people, putting them out of jobs [6]. Companies will gravitate towards the cheapest course of action, replacing humans with machines (as opposed to paying employees higher wages).
Other businesses would see reduced income and consequently raise prices; the increased payrolls and costs of raising the minimum wage would hurt business owners and consumers alike [6]. This would additionally result in lower consumer demand, harming smaller businesses that cannot afford the technology utilized by large corporations. Smaller businesses have already been devastated by the COVID-19 pandemic; the decision to increase the minimum wage on top of this could ultimately serve as a catalyst to put many more out of business.
While supporters of a $15 per hour minimum wage purport that it would bring families out of poverty, it would also result in many others losing income due to the loss of their jobs (on the employee’s end) and the higher costs of labor (on the employer’s end). The net effect of this action would reduce the average family income. The CBO estimates a steep $9 billion decrease in real family income by 2025 (considering increased wages for low wage workers, lowered wages for jobless workers, losses in income for business owners, etc.) [1]. An exemplar of this is Seattle Washington, in which the minimum wage was increased to $13 per hour in 2016. This resulted in an income of loss of $125 per month for workers. As such, a high minimum wage is not necessarily an effective tool for a living wage or increased mobility; the decision also significantly decreased the entry of new workers, making it even harder for inexperienced workers to enter the labor market [4].
In addition, the CBO projects that the deficit of the cumulative federal budget will increase by $54 billion from 2021 to 2031, especially after 2025 (once the wage meets its $15 per hour target). In addition, federal spending would increase due to the subsequent raised prices for goods and services, as well as costs such as providing health care and more unemployment compensation [2]. The marginal cost of raising the minimum wage to $15 per hour would likely have too great an impact on the economics of people and businesses, outweighing its marginal benefits; it would thus not be a rational decision to raise the minimum wage to $15 per hour. Meanwhile, an increase to a lower price, such as $10 per hour, could still raise 1.5 million workers’ income while having relatively little impact on employment [7]. Some supporters claim that a $15 minimum has precedence by presenting Australia’s federal minimum wage, which is the highest in the world at $19.84 per hour. However, this is in Australian currency, which is worth ⅔ of the US currency. On top of that, Australia has higher costs of living, so the Purchasing Power Parity-adjusted cost would be $12.14 per hour. In other words, a minimum wage of $15 an hour would be more extreme than that of Australia, which is already the highest federal minimum wage [9].
An increase in the minimum wage would also encourage people to settle for those jobs; minimum wage jobs are typically not meant to serve as sustainable support for families. Jobs are considered low-wage for a reason: they are usually meant to provide experience for future jobs, but alone, they contribute to little success/other opportunities in life. In its report, “Characteristics of minimum wage workers, 2018,” The U.S. Bureau of Labor Statistics estimated (based on reported hourly wages) that minimum wage workers are typically younger; in 2018, those under the age of 25 represented ⅕ of hourly paid workers, but constituted for almost half of workers paid the federal minimum wage or less [8]. By creating potentially livable wages, this action would promote many young people to settle for the bare minimum, creating a shortage of diligent workers in fields that need them the most. Furthermore, there are other policies that are means-tested, so only those who truly need financial assistance receive it. For example, the Earned Income Tax Credit (EITC) can mitigate job losses and cost-of-living increases from an unrealistically high minimum wage [5]. Therefore, it has been suggested that funds would ultimately be better spent providing further education or training people to pursue jobs where there are shortages of workers, such as the trades industry [6].
There is much uncertainty regarding the potential change’s magnitude and effect on employment and income and how employers would adapt to said increase. Ultimately, increasing the minimum wage to $15 per hour is a subject for debate, but there are certain disadvantages to it that must be taken into consideration. Though increasing the federal minimum wage to $15 per hour could provide some benefits to current lower-wage workers, its lasting effects could be detrimental. Employers and employees alike would be severely impacted by its costs. In other words, one cannot deny the decision’s detriments in favor of analyzing its benefits. Policy cannot be made on idealism; only by analyzing all components can the government truly help the poor and make a more equitable country.
Sources
Congressional Budget Office. (2019). How Increasing the Federal Minimum Wage Could Affect Employment and Family Income. https://www.cbo.gov/publication/55681
Congressional Budget Office. (2021). The Budgetary Effects of the Raise the Wage Act of 2021. https://www.cbo.gov/publication/56975
Initiative on Global Markets. (2021). The US Minimum Wage. https://www.igmchicago.org/surveys/the-us-minimum-wage/
Jardim, E., Long, M. C., Plotnick R., Inwegen, E. van, Vigdor, J., & Wething H. (2017). Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle (Report No. MnDOT 2015-05). National Bureau of Economic Research. https://evans.uw.edu/wp-content/uploads/files/two%20page%20overview.pdf
Internal Revenue Service. (2021). Earned Income Tax Credit (EITC). https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit-eitc
Kelly, J. (2019, July 10). The Unintended Consequences Of Raising Minimum Wage To $15. Forbes. https://www.forbes.com/sites/jackkelly/2019/07/10/the-unintended- consequences- of-the-15-minimum-wage/?sh=582a75fee4a7
Selyukh, A. (2019, July 8). $15 Minimum Wage Would Boost 17 Million Workers, Cut 1.3 Million Jobs, CBO Says. National Public Radio. https://www.npr.org/2019/07/08/ 739607964/-15-minimum-wage-would-boost-17-million-workers-cut-1-3-million-jobs-
U.S. Bureau of Labor Statistics. (2019). Characteristics of minimum wage workers, 2018. https://www.bls.gov/opub/reports/minimum-wage/2017/home.htm
World Population Review. (2021). Minimum Wage by Country 2021. https://worldpopulationreview.com/country-rankings/minimum-wage-by-country