Arguments For and Against Minimum Wage in the US. On July 18, 2019, the U.S. House of Representatives passed an amended version of the Raise the Wage Act of 2019, which would gradually increase the federal minimum wage to $15 an hour by 2025. The minimum wage is a legally mandated price floor on hourly wages, below which non-exempt workers may not be offered or accept a job. In addition, a similarly large wage jump has never been tried before. Generally, arguments against raising the minimum wage fall into the three categories below: Creates fewer jobs. The bill died in the Senate, however, as the Senate Committee on Health, Education, Labor, and Pensions declined to vote on the legislation (or to discuss any increase in the minimum wage, for that matter). Opponents of raising the minimum wage believe that higher wages could have several negative repercussions: leading to inflation, making companies less competitive, and resulting in job losses. It allows companies to make certain decisions about changing their labor force as a response to fluctuations in the market and to help boost production. The current federal minimum wage is $7.25 an hour and has not been increased since 2009. One potentially negative impact that is less readily apparent is the possibility that a higher minimum wage would result in increased labor market competition for minimum wage jobs. Instead, they claim, most minimum wage workers provide second or third sources of income to a household and are often middle-class kids working summer jobs. Another reason most economists oppose a $15 federal minimum wage is that the balance of empirical evidence suggests minimum wage hikes fail to achieve the policy goals they are intended to. (May 7, 2009)http://www.spiegel.de/international/germany/0,1518,530768-2,00.html, Kibbe, Matthew B. The 2019 CBO report estimates that raising the minimum wage to $15 an hour by 2025 would result in the loss of approximately 1.3 million jobs. A boost to economic growth is another potential advantage of increasing the minimum wage, as consumer spending typically increases along with wages. (May 2, 2009)http://www.dol.gov/esa/whd/flsa/, Wrigley, Chris. He had to lay off 5 of his 35 employees who worked at his small book store in New Mexico. Dave Roos This is called cost-push inflation and some economists believe raising the minimum wage is one of the worst culprits. Though the current federal minimum wage in the U.S. is $7.25 per hour, 29 states and D.C. have approved higher minimum wages.. 29 states plus the District of Columbia (DC) have a minimum wage higher than the federal minimum wage. This benchmark was set so that employers would be unable to hire any staff for less than the suggested hourly rate. "State Minimum Wages | 2020 Minimum Wage by State" Accessed Nov. 10, 2020. For the factory owner, this employee will clearly bring in less money. Please copy/paste the following text to properly cite this HowStuffWorks.com article: Copyright © 2021 HowStuffWorks, a division of InfoSpace Holdings, LLC, a System1 Company. Investopedia requires writers to use primary sources to support their work. It impacts all wages. Information about the device's operating system, Information about other identifiers assigned to the device, The IP address from which the device accesses a client's website or mobile application, Information about the user's activity on that device, including web pages and mobile apps visited or used, Information about the geographic location of the device when it accesses a website or mobile application. A non-exempt employee is one who qualifies to earn at least minimum wage and receive overtime under the federal Fair Labor Standards Act (FLSA). "The Minimum Wage: Washington's Perennial Myth." The arguments against the wage are always basically the same, but in the days since Seattle adopted the $15 minimum wage, a growing body of evidence has mostly laid those objections to rest. No corporations rely on the … Many advocates for the minimum wage argue that not only is the minimum wage necessary, but that it's too low. "How Minimum Wage Works" 2002. Arguments For and Against the Minimum Wage. Meanwhile, an intangible benefit that could translate into tangible benefits for both companies and employees is improved employee morale resulting from higher wages. 12, the Senate voted to implement an increased federal minimum wage provision into President Biden’s new Covid relief package. reduce pay differentials between genders. Info: 3441 words (14 pages) Essay Published: 18th Sep 2017 in Politics Reference this Among the disadvantages of increasing the minimum wage is the probable consequence of businesses increasing prices, thus fueling inflation. Increasing the minimum wage is expected to lift individuals out of poverty and improve work ethic, however, it also comes with many possible negative implications, such as inflation and a loss of jobs. Increasing the minimum wage would rise economic activity and spur job growth. With Joe Biden winning the presidential election in November 2020, a federal minimum wage of $15 an hour might be closer, as it is one of his policy agendas. Another projected problem resulting from an increased minimum wage is that of potential job losses. U.S. Department of Labor. 1.8 million … (May 7, 2009)http://www.weeklystandard.com/Content/Public/Articles/000/000/012/592klkms.asp, Economic Policy Institute. The logic is that under the current minimum-wage laws, the only person bearing the financial burden for fighting poverty is the business owner who has to pay his workers minimum wage [source: Landsburg]. "Compliance Assistance: Fair Labor Standards Act (FLSA)." The current federal minimum wage is $7.25 an hour, though many states have higher minimum wages. These workers, many of whom represent marginalized groups (women, minorities, youth workers, the disabled, and so on), simply don't have the bargaining power to fight for a minimum living wage without government intervention. Info: 1834 words (7 pages) Essay Published: 29th Aug 2017 in Economics Reference this The minimum wage, they say, is an artificial, government-imposed value for an individual worker. Here's how it works: If a manufacturer is suddenly forced to pay his workers $7.25 an hour instead of $6.55 an hour, he needs to raise the price of his product to recoup the costs. Economists on both sides of the issue hold up study after study proving that the minimum wage either does or doesn't contribute to a rise in unemployment, so that issue remains unresolved. increase in the minimum wage would sustain employment numbers. Therefore, he deserves a lower hourly pay. "In Minimum Wage Debate, Germany Should Look Abroad." After two weeks of detailing the arguments for and against raising the federal minimum wage — interviewing economists and policy experts, poring over a … (May 2, 2009)http://www.marketwatch.com/news/story/china-raises-minimum-wages-calm/story.aspx?guid=%7BB120D814-3C01-468A-9C11-B7596BCE1A35%7D. "Hundreds of Economists Say: Raise the Minimum Wage." A 2019 Congressional Budget Office (CBO) report projected a significant improvement in the standard of living for at least 17 million people, assuming a minimum hourly wage of $15 by 2025, including an estimated 1.3 million people being elevated above the poverty line. (May 2, 2009)http://www.cato.org/pubs/pas/pa106.html, Landsburg, Steven E. "The Sin of Wages." The offers that appear in this table are from partnerships from which Investopedia receives compensation. In 2008, economists David Neumark and William L. Wascher surveyed two decades of research into the effects of minimum wage laws. BY GARY WOLFRAM -- Bernie Sanders and those who support a minimum wage do not observe the unintended effects of the law. (May 2, 2009)http://ec.europa.eu/eures/main.jsp?catId=8369&acro=living&>, Grossman, Jonathan. Living wage refers to a theoretical wage level that allows an individual to afford adequate shelter, food and other necessities. The primary argument advanced in favor of raising the minimum wage is that higher earnings would improve the overall standard of living for minimum wage workers by … We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. Slate. July 26, 2004. Here are some of the statistics they use to support an increase in the minimum wage: Opponents of the minimum wage claim that a fixed minimum wage actually hurts the same low-rung workers it vows to protect. Every time an amendment comes before the U.S. Congress to raise the minimum wage, advocates and critics pull out some convincing arguments to win over public opinion. Rogan allowed Schiff to make his case against the minimum wage, and he did a solid job. Reasons AGAINST A $15/Hour Minimum Wage. It was initially set at $0.25 per hour and has been increased by Congress 22 times, most recently in 2009 when it went from $6.55 to $7.25 an hour. Peter Schiff made an appearance on the Joe Rogan Podcast last week. On the other hand, those arguments in favor of increasing the minimum wage cite statistics, social data, historical evidence, and are made from positions of authority in fields of Economics, Political Science, Sociology, and Law. For example, if a young worker is applying for his first job as a machinist at a factory, the owner of the factory knows that the worker won't produce as many widgets as a more experienced employee. Der Speigel. When you adjust minimum wage for inflation, the real value of today's rate is the lowest it's been since 1952 [source: The annual earnings of a full-time minimum wage worker (40 hours a week) is $15,080 before taxes. UK Minimum wage Low Pay Commission on history of minimum wage and its effects, 2019 UK employment rate % The most common argument in support of the minimum wage is that it protects the workers at the lowest rung of the socio-economic ladder. In the United States, the minimum wage is still 31 percent lower than the average. The Fight for (and Against) a $15 Minimum Wage After an increase failed to make it into the stimulus package, we look at the shifting political and economic arguments surrounding the issue. July 9, 2004. It could also reduce government spending and lessen income, race and gender inequality. A higher minimum wage would put more discretionary dollars in the pockets of millions of workers; money that would then flow to retailers and other businesses. Arguments for and against the National Minimum Wage (NMW) in the UK: stop employees being taken advantage of by being paid unfair wages by their employers. On top of that, the amount of the wage increase is unprecedented. There are strong arguments both for and against raising the minimum wage including The potential to improve health, academics, and reduce crime rates. May 23, 1988. The discussion around the increase in the federal minimum wage brings both pros and cons. The federal minimum wage was introduced in 1938 during the Great Depression under President Franklin Delano Roosevelt. Combined with the empirics, there is a solid argument against for the minimum wage helping the overall economy. The best argument for a minimum wage involves several labor markets market failures that affect low-wage workers. Blake, Whitney. How does the Social Security system work? Many economists and business executives who point out that labor is a major cost of doing business argue that businesses will be forced to cut jobs to maintain profitability. If your opponents fail to attack one of either the logic or the empirics, make that a key voting issue. National Conference of State Legislatures. Minimum wage laws cause unemployment, these opponents say, because they price those … Another central argument against minimum wage increases is the impact this would have on small businesses financially. Increased prices mean a general increase in the cost of living that could essentially negate any advantage gained by workers having more dollars in their pockets. The primary argument advanced in favor of raising the minimum wage is that higher earnings would improve the overall standard of living for minimum wage workers by providing them with a more appropriate income level to handle the cost of living increases. An Argument Against Raising Minimum Wage Many economists argue that raising the minimum wage won't alleviate poverty and would shake an … We also reference original research from other reputable publishers where appropriate. The arguments for and against raising the federal minimum wage March 22, 2021 | 1:20 PM GMT It’s been more than a decade since the federal minimum wage increased. Labor market flexibility is an important part of the labor market. "Winston Churchill: A Biographical Companion." The Weekly Standard. Increasing employee morale could easily translate into more tangible benefits, such as increased employee retention and reduced hiring and training costs. It begins with the fact that most low-wage … The labor market refers to the supply of and demand for labor, in which employees provide the supply and employers provide the demand. set a standard of the minimum worth of a worker. "Fact Sheet #2: Restaurants and Fast Food Establishments Under the Fair Labor Standards Act (FLSA)." It's a shame that governments have to step in and … "The Mythology of Minimum Wage." According to U.S. Census statistics, the average annual salary of a family with a minimum wage worker was $43,000 in 2006 [source: Blake]. Some minimum wage reformists say that tax rebates for low-income workers are much more effective than minimum wage laws. The real value of a worker should be decided in the open market. With a minimum wage increase once again prominently featuring a policy debate, I’ll offer the best arguments for and against any minimum wage. This could impede younger, less experienced entrants to the job market from obtaining work and gaining experience to move their careers forward. When the minimum wage increased between 2007-2009 from $5.15/hour to $7.25/hour, small business owner Mike Beckett was hit hard. The Real Argument For Raising The Minimum Wage. If low-wage workers are supported through tax cuts and rebates, then all taxpayers can share the financial burden. "China raises minimum wage to calm consumers." Therefore, he deserves a lower hourly pay. If you don’t work for minimum wage you are probably still a consumer and thus either through wage increases or cost increases the results of this debate will have an impact in your life. (May 2, 2009)http://epi.3cdn.net/88c6aac4ee16915866_ldm6iie1l.pdf, European Commission. Feb. 27, 2008. National Minimum Wage - arguments for and against with Evaluation. Labor Market Flexibility: What You Need to Know, State Minimum Wages | 2020 Minimum Wage by State. Opponents argue that raising the minimum wage would likely result in wages and salaries increasing across the board, thereby substantially increasing operating expenses for companies that would then increase the prices of products and services to cover their increased labor costs. The net outcome of an increased minimum wage might be a large number of overqualified workers taking minimum wage positions that would ordinarily go to young or otherwise inexperienced workers. Feb. 2, 2009. In so doing I’ll attempt an ideological Turing test, making the arguments so clearly that a reader cannot discern … For example, if a young worker is applying for his first job as a machinist at a factory, the owner of the factory knows that the worker won't produce as many widgets as a more experienced employee. (May 2, 2009)http://www.dol.gov/oasam/programs/history/flsa1938.htm, Hornig, Frank; Michael Sauga; Stefan Simons. Business owners frequently note the challenge of providing sufficient encouragement to spur workers to put maximum effort into their job duties, and that this is particularly problematic with low-wage workers who feel that their job efforts aren't keeping them out of poverty. The argument against increasing minimum wage is that it would result in a decrease in jobs, because businesses would be less inclined to hire more workers. For lots more information on inflation, interest rates and other important economic principles, follow the links below. "Minimum Wage System Set Up." These include white papers, government data, original reporting, and interviews with industry experts. A value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. Basically, while a $15 minimum wage might not be a big deal in an expensive place like New York or San Francisco, the tradeoffs would be much steeper in lower-cost places like small towns and rural areas. Proponents of raising minimum wages argue that changes are needed to help incomes keep pace with increasing costs of living, and a higher minimum wage will lift millions out of poverty. You can learn more about the standards we follow in producing accurate, unbiased content in our. Arguments Against Minimum Wage 793 Words | 4 Pages. (May 2, 2009)http://www.china.org.cn/english/BAT/102190.htm, Zhou, Moming. Some evidence does suggest that it will affect unemployment. Aug. 16, 2006. In short, a minimum wage increase doesn't impact just minimum wages. "Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage." Arguments against Minimum Wage Laws Opponents of the minimum wage claim it has these effects: Excludes low cost competitors from labor markets, hampers firms in reducing wage costs during trade downturns (etc. Opponents of the minimum wage argue that if the factory owner is forced to pay that young worker an artificially high minimum wage, then he will choose not to hire the worker, because it won't make financial sense. Since 2010, the UK minimum wage has increased far above the inflation rate – from £5.93 to £8.21 (27% increase). Opponents of a living wage have been cited as repeating emotionally based propaganda that lacks a factual basis. The numbers could be substantially higher if companies made a major move toward outsourcing more jobs to less expensive labor markets outside the country. (May 2, 2009)http://www.slate.com/id/2103486/, U.S. Census Bureau. Despite efforts to raise the minimum wage, no bill has successfully passed both chambers of Congress. However, there is significant evidence to dispute this. Other critics say that so-called "full-time" minimum wage workers don't really exist. MarketWatch. Republican opinion on this issue is more divided, but a majority of Republicans and Republican leaners – 57% – oppose raising the minimum wage to $15 an hour, including nearly three-in-ten (29%) who say they are strongly against it. Saying we have a "free market" that will take care of workers is a myth. The strongest political argument against increasing the federal minimum wage is the regional differences argument. CATO Institute. Arguments for and Against the $15 Minimum Wage for Health Care Workers Affiliation J. Paul Leigh PhD J. Paul Leigh is with the Department of Public Health Sciences, the Center for Healthcare Policy and Research, and the Center for Poverty Research, at the University of California, Davis, and UC Davis Medical School, Davis. You consent to our cookies if you continue to use our website. Pro: A raise in minimum wage is a raise for all by Melina Tisopulos On Friday, Mar. Is a free market "free" if it's regulated? (May 2, 2009)http://books.google.com/books?id=HBUslUOGOgkC&pg=PA327&lpg=PA327&dq=trade+boards+act+1909&source=bl&ots=emcBYBAN76&sig=w_deiod908klTab1-hrVrIaoDZc&hl=en&ei=YUQASq-0HpThtgfi462KBw&sa=X&oi=book_result&ct=result&resnum=10, Xinhua News Agency. "Poverty Thresholds for 2008 by Size of Family and Number of Related Children Under 18 Years." (May 13, 2009)http://www.census.gov/hhes/www/poverty/threshld/thresh08.html, U.S. Department of Labor. John T. Harvey. ), generates various industrial-economic inefficiencies as … The minimum wage is a hot-button issue for politicians and economists. We also share information about your use of our site with our social media, advertising and analytics partners who may combine it with other information that you’ve provided to them or that they’ve collected from your use of their services. While one set of studies finds little to no negative effect on unemployment, others do. "Germany: Working Conditions." The problem with arguing against … While some proponents of raising the minimum wage estimate that a much larger number of individuals and families will move out of poverty if they earned more money, a related potential benefit is a projected reduction in the need for federal and state government expenditures on financial aid for poor and low-income individuals. Another argument against minimum wage is that it contributes to inflation. For the factory owner, this employee will clearly bring in less money. (May 2, 2009)http://www.dol.gov/esa/whd/regs/compliance/whdfs2.pdf, Wage and Hour Division. So, in this scenario, instead of working for less than minimum wage until he gets more experience, the young worker is now unemployed [source: Kibbe]. Raising the federal minimum wage to $15 an hour is a policy goal for many lawmakers. Jan. 25, 2008. With Democrats about to take control of the House, it is likely we will see an increase in the federal minimum wage pass the lower chamber, even if it has no chance of becoming a law.We will just as surely hear opponents making completely sound economic arguments against minimum wage laws. ABC-CLIO. As a result, the debate about whether to lift the minimum wage rages on. Letter: Arguments against minimum wage increase are insulting Mar 8, 2021 Mar 8, 2021; 0 {{featured_button_text}} Activists appeal for a $15 minimum wage near the … ... And so while it does not make sense to argue for or against changes in the minimum wage … 18 May 2009. Employees who are more inclined to stay with a company longer could benefit from greater advancement and from an overall reduction in job-related relocation expenses.