Exploring Minimum Wage Part 1

Exploring Minimum Wage Part 1

By: Erin Venable | July 08, 2017

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 in favor of raising minimum wage.

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The Argument For:

The democrats who proposed this bill were led by Senator Bernie Sanders of Vermont, who the Washington Examiner reports, said “What we are here today is to say that a living wage is $15...If you are working 40 or 50 hours a week, you should not be living in poverty.” The democrats are arguing that this bill will raise a large portion of the country’s workers from below the poverty line, and alone in making that argument.

The issue of minimum wage has caused such passionate feelings among people that the National Employment Law (NELP) created a project called Raise the Minimum Wage. This project collects a lot of information on the subject and helps to organize anyone who wants to support the raising of minimum wage. There are a number of questions posed to those in support of raising the federal minimum wage that are worth exploring.

The Big Questions:

How many workers would be affected?

One of the most important things to consider is how many people would be affected by this minimum wage pay raise. The NELP says “an estimated 35 million workers, more than 1 in 4 working men and women in the US, would get a badly needed raise.” That is a large chunk of the nation's working population that would get a pay increase. Toggl also says that “according to the CBO, raising the minimum wage to $10.10 would bring 900,000 people out of poverty.” That is only part of the total proposed minimum wage raise to $15, so presumably even more people would be raised out of poverty with the larger increase.

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When was minimum wage last raised?

The federal minimum wage rate has increased slowly over the years, even with the inflation that has occurred. The minimum wage was raised from $6.55 to $7.25 on July 24, 2009. Before 2007, however, the minimum wage had been sitting at $5.15 per hour for 10 years. States have been more proactive than the federal government in terms of raising minimum wage. Twenty five states have raised their minimum wage since the last federal increase. At the local level, increasing minimum wage has been even more prevalent. NELP says that “more than 40 cities and counties have raised minimum wage locally since 2014 and at least 34 since 2014.”

How would raising minimum wage affect the economy and job loss?

Doubling the federal minimum wage rate worries many because they don't know how it will affect the economy and unemployment. Many are concerned that the economy could be negatively affected because this wage raise could cause companies to raise prices to compensate for the higher salaries. NELP makes the argument that “consumer spending drives 70% of the economy and increasing demand is key for jumpstarting and maintaining production and hiring. A raise in the minimum wage puts money into the pockets of low-income consumers, who immediately spend it at local businesses.” They make the point that by giving workers more money to spend, the workers will feed the economy by spending more of their money.

Supports say by giving workers more money to spend, the workers will feed the economy by spending more.

Many are concerned that raising minimum wage will cause employers to let go of employees and freeze any company hiring. However, NELP says “the bulk of rigorous research examining hundreds of case studies of minimum wage increases at the state and local levels finds that raising the minimum wage boosts incomes for low-paid workers without reducing overall employment or job growth to any significant degrees.” Those who support raising the minimum wage firmly believe that the unemployment rate will not be significantly influenced by this bill.

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How would raising minimum wage affect employers?

While legislation raising the federal minimum wage is relevant to individuals earning minimum wage, it is also significant for employers and businesses. They would need to deal with this new pay increase for their employees, if the federal minimum wage is raised. Many companies are concerned about this bill, but those in support of the legislation have answers to employer’s concerns and worker's concerns about their employers.

Another concern is that these higher costs will drive companies out of business. If organizations are closing, there will be less jobs, and unemployment rates will rise. The Raise Minimum Wage Project says “A 2012 NELP report found that two-thirds of all low wage workers are employed by large companies rather than small businesses, and that the vast majority of the largest low-wage employers in the country are earning strong profits and can afford higher wages.” They use their research as evidence that large companies are often the ones employing low-wage workers and they can afford these increases.

As for employers concerns, there are benefits to increasing the federal minimum wage rate. It may seem like increasing minimum wage will only cost companies money and force them to close. However, the Raise Minimum Wage Project argues that “research has documented how especially in low-wage industries, raising wages reduces turnover, because workers who are paid more stay with their current employer longer.” Having your workers live below the poverty line is not ideal for any business. Supporters of this bill argue that raising minimum wage will encourage employees to stay with companies longer and perform better while working there.

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Because Congress is 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 in support of raising minimum wage here. By knowing the arguments for raising the federal minimum wage rate, you can better understand where this legislation comes from and why congressional democrats are proposing this bill.

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