Exploring Minimum Wage Part 2

Exploring Minimum Wage Part 2

By: Erin Venable | July 14, 2017

The federal minimum wage is currently on trial. As a worker in the United States, you may be affected the debate to raise the federal minimum wage rate, which rests at $7.25 since July 24, 2009. Congressional Democrats have proposed legislation to “raise the federal minimum wage to $15 by 2024” reports the Washington Examiner. With this legislation on the table, many have weighed in in favor of the bill and against it. Here we are focused on the opinions against raising minimum wage.

The Argument Against:

While there are many states across the country raising their minimum wage rates, some have chosen to lower theirs instead. Why? What are the arguments against raising minimum wage rates in states and across the country? Why would some believe it is better to lower it? Many are concerned about higher minimum wage rates causing unemployment, higher prices, and forcing businesses to close.

They argue that while larger companies can afford to pay higher wages, but small companies will be forced to let employees go or even close. “If Congress raised minimum starting wages to $15 - and total hiring costs to $18.61 per hour - businesses would respond by eliminating positions, cutting hours, and looking for new ways to implement labor-saving technology” Heritage argues. There are a few questions often raised in the debate about federal minimum wage and by exploring the answers of those who are against raising minimum wage, we can get a better idea of their argument and reasoning.

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The Big Questions:

How Would Raising Minimum Wage Affect Unemployment?

Many in this debate about minimum wage are concerned that higher wages will cause companies to let employees go or halt hiring. Those who are against raising federal minimum wage often site this as one of the top reasons for their opinion. Heritage says, “Businesses would respond to these higher labor costs by reducing employment of affected workers by over one-sixth, this eliminating approximately seven million full-time equivalent jobs by 2021.” With the job market already so hostile to job seekers, a projected increase in unemployment is concerning to many.

How Will Higher Minimum Wage Affect the Little Guy?

The other main concern for unemployment is how it will affect the less skilled, less experienced, or younger person’s chances of being hired. Heritage describes this by saying, “Such a high hurdle would make it much harder for less experienced and less skilled workers to find full-time jobs. Many of these workers are not yet creative enough to create that much value for their employers and businesses will not hire them at a loss.” Those against raising minimum wage argue that it increases the hostility of the job market and makes it extra hard for younger and less experienced job seekers.

Many are concerned about higher minimum wage rates causing unemployment, higher prices, and forcing businesses to close.

Will Higher Minimum Wage Make Businesses Leave or Close?

While minimum wage can be determined on a state by state basis, it can never go lower than the federal minimum wage rate. That’s why raising federal minimum wage is so hotly debated. Those against a higher federal minimum wage rate believe that it may drive businesses to close or leave the country to find lower labor costs. Heritage says, “Some companies might have to face shutting down or leaving America entirely to cope with additional expenses.” Those against higher minimum wage argue that it is important to encourage businesses to stay in the country by keeping the labor costs low. Many also argue that labor costs could drive smaller local businesses to close entirely and that it may make it more difficult to start new businesses.

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How Should Minimum Wage Rates be Determined?

A natural question to ask those against higher minimum wage rates is how exactly minimum wage should be determined. What is the alternative to gradually raising federal minimum wage? Forbes reports that the Kentucky Governor Matt Bevin defended their decision to lower state minimum wage by arguing “Wage rates ideally would be established by the demands of the labor market instead of being set by the government.” This perspective focuses on the differences between national, state, and local markets and argues that federal minimum wage is too broad to suit each market. Heritage says “A federal minimum wage increase disproportionately affects states with lower living costs.” They think that federal minimum wage is too broad for the areas of the country where labor costs may more strongly affect the success of businesses. They argue that there should be no federal minimum wage and that any minimum wage decisions should stay at the state or local level.

With Congress considering doubling the minimum wage rate, there are many who have weighed in for and against this movement. We have explored, in detail, the arguments against raising minimum wage here. By knowing the arguments against raising the federal minimum wage rate, you can better understand the debate around this legislation and why it is being opposed.

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