Consequences of Raising the Minimum Wage
When I apply for my job in a few weeks I, as would the millions of other people currently employed in a minimum wage job, quite frankly would love to be paid ten or fifteen dollars an hour. Spearheaded by presidential nominee Hillary Clinton and senator Bernie Sanders, there is a movement to create a spike in the United States minimum wage. Despite valid arguments from both sides, some things are too good to be true. A sharp increase in the minimum wage is overall a decision that would not help those in poverty and is ultimately the wrong direction to head in.
It’s understandable, isn’t it? More money in the hands of workers would theoretically help bring them out of poverty and give them the boost they need to rise above poverty, wouldn’t it?
Unfortunately, this may not entirely be the case. No decision can be made without consequences and thus a trade off is made. I can’t expect that if I decide to hang out with my friends instead of doing my homework that there will be no consequences. As such, raising the minimum wage to $9.00 an hour would result in 100,000 jobs lost, while raising the minimum wage to $10.10 an hour would result in around 500,000 jobs lost, according to the congressional budget office. Entrepreneurs and business owners simply can’t afford to pay employees 10 dollars an hour, resulting in widespread layoffs. Ultimately, it will be more difficult for those in poverty to find a job and retain it, resulting in a massive unemployment hike. Therefore, the success that the United States has in the economic goal of full employment would be compromised.
In addition, many of the jobs that pay minimum and low wages will see the companies replace them with automated machines and robots. According to a Wall Street Journal article, McDonald's intends to “make it easier for customers to order and pay for food digitally and to give people the ability to customize their orders.” It would be foolish for banks to keep tellers, for restaurants to keep cashiers, for factories to keep assembly line workers that get paid ten or fifteen dollars an hour when they can easily replace them with salary free machinery.
Even if there were no job consequences to the minimum wage movement, this still would not have the effect that proponents intended. The Bureau of Labor Statistics reported that half of everybody who received minimum wages or less were under 25 years old, meaning that half of the people receiving the proposed increase are people who are less likely to have started a family, as shown in the chart below.
However, it would be unwise to conclude that a minimum wage increase is a terrible idea on paper and in theory, to propose that this issue is simply a black and white, with us or against us quandary. According to journalistsresource.org, inflation has caused the minimum wage rate to be drastically lower than it was back before the nineties; for example, the minimum wage back in 1968 would’ve been ten dollars an hour in the current monetary value, and in the eighties, it would’ve been nine dollars an hour today.
Also, a raise in minimum wage would likely allow people who still have their jobs to live above the poverty line instead of below it.
So what we have here is a tough decision to make, but overall, the marginal cost of outweighs the marginal benefit of raising the minimum wage; costing thousands upon thousands of jobs outweighs allowing people to live just above the standard of living. Unfortunately, this is life - measuring opportunity costs and giving up a desired effect in order to achieve the best results. If we can guarantee that thousands of people have jobs, then they have a better chance than they do without one, and therefore raising the minimum wage is in the end not a good idea.
The minimum wage debacle is, as too many issues are, a supremely complicated one, and I sincerely hope that I’ve shed some light on the actual effects of raising the minimum wage.
States, Congress Of The United, and Congressional Office Budget. CBO(n.d.): n. pag. Congressional Budget Office. United States Congress. Web. 25 Sept. 2016.
"Minimum Wage Backfire." WSJ. Wsj.com, 2014. Web. 26 Sept. 2016.
"Ratio of Minimum Wage to Average Wage, circa 2011." (2014): n. pag. BLS Reports. Bureau of Labor Statistics. Web. 25 Sept. 2016.
@TCFdotorg. "Graph: Why Democrats Want to Rebrand the Minimum Wage as a Women's Issue." The Century Foundation. N.p., 08 Mar. 2016. Web. 26 Sept. 2016.
"Minimum Wage: Updated Research Roundup on the Effects of Increasing Pay - Journalist's Resource." Journalists Resource. N.p., 08 Aug. 2016. Web. 26 Sept. 2016.