The Minimum Wage Must Be Raised With Moderation
Kyle Machalec
Mounds View High School
Arden Hills, MN
The current minimum wage is dangerously low, but the proposed $15 is risky and unsupported. This problematic situation is a call to action. With the present minimum wage being too low and the suggested $15 being too high, a new minimum wage between these two values could fix many of the prevailing problems in our country. I propose that a raise between $9-$10.10 per hour would create the most sustainable benefits to our economy.
A raise in the minimum wage would alleviate and potentially fix many problems in today’s society. According to a study by the Economic Policy Institute, an increase to $10.10 would add roughly 85,000 net new jobs to the economy and increase GDP by $22 billion (Cooper). This is because a raise in minimum wage would give more purchasing power to the lower income households. Most lower income consumers will spend a higher percentage of any new income because they have more unfulfilled needs and wants than higher earners. With this increase in spending, GDP would also increase. In fact, the Federal Reserve Bank of Chicago stated that an increase in the hourly minimum wage by $1.75 could increase real gross domestic product by up to 0.3 percent in the near term. They also stated that it would have no negative effect in the long term (Aaronson, Daniel, and Eric French). A common rebuttal is that employment would be reduced. However, according to a series of 64 minimum wage studies conducted by economists Hristos Doucouliagos, PhD, and T.D. Stanley, PhD, there is “little or no evidence of a negative association between minimum wages and employment” (Doucouliagos, Hristos, and T.D Stanley).
Along with the resulting growth within the economy, raising the minimum wage would reduce poverty. The United States Census Bureau lists the poverty level in 2009 for a single-parent under the age of 65 as $14,787, less than the full-time minimum wage income at that time. By 2017, the poverty level for this type of family was $16,895 (US Census Bureau). Since the minimum wage has not changed in this time, the people whose salaries depend on the minimum wage now have to spend more to get the same goods -- and can afford less. A person working full time at the federal minimum wage is now $1,815 below the poverty line. If the minimum wage was raised, many people would immediately be moved out of poverty. In support of this idea, the Congressional Budget Office states that increasing the minimum wage to $9 per hour would lift 300,000 people out of poverty. To go even further, an increase to $10.10 would lift 900,000 people out of poverty (Congressional Budget Office).
If an increase in the minimum wage is helpful, one might wonder why we should not increase it all the way to $15 per hour. Unfortunately, we must consider the opportunity cost. To start, a dramatic raise in the minimum wage would hurt or even destroy some businesses. For example, according to Jamie Richardson, the vice president of White Castle, a minimum wage of $15 per hour would force the company to close almost half of its stores (Williams). This is because this business would not be able to afford paying all of their workers a higher wage.
In addition to hurting existing businesses, a substantial raise in the minimum wage would discourage the creation of new businesses. At the creation of a business, most entrepreneurs do not have a large amount of funding. Without a high minimum wage, they could hire new workers for an acceptable price. However, if the minimum wage is raised substantially, they might not be able to afford the necessary labor.
If a business does not want to lay off any of its staff, and it does not have the money to support its current workers, it would have to raise its prices. According to a 2015 study by Purdue University of many different limited-service restaurants, raising the minimum wage to $15 per hour would lead to an estimated 4.3% increase in prices at those restaurants (Purdue University). This same logic can be applied to any company that sells goods or services. With this increase in price, lower income consumers, the very people in poverty that the increase in minimum wage was supposed to help, would have to pay more for the purchases that they were struggling to afford in the past.
Finally, a dramatic increase in minimum wage would decrease high school enrollment rates and increase drop-out rates. According to Mark J. Perry, a professor of economics and finance at the University of Michigan's Flint campus, “the attraction to higher wages from minimum wage legislation reduces high school completion rates for some students with limited skills, who are then disadvantaged with lower wages and career opportunities over the long-run if they never finish high school” (Perry). The more your job is paying you, the greater the incentive to miss school in order to work and get that pay.
In conclusion, an increase in the minimum wage will provide many benefits to the economy. However, these benefits must be weighed against the costs of this change. I believe that a minimum wage between $9 and $10.10 would maximize benefits because it will drastically enhance the lives of the average citizens in the United States. In addition, this range is not as big of a jump as a $15 per hour minimum wage, so the consequences would still be manageable for the economy in the long run. With all of this in mind, a minimum wage between $9 and $10.10 would transform the economy into something future generations will be proud of.
Works Cited
Aaronson, Daniel, and Eric French. “How Does a Federal Minimum Wage Hike Affect Aggregate Household Spending?” Federal Reserve Bank of Chicago, Aug. 2013, www.chicagofed.org/publications/chicago-fed-letter/2013/august-313
Congressional Budget Office. “The Effects of a Minimum-Wage Increase on Employment and Family Income.” Congressional Budget Office, 18 Feb. 2014, www.cbo.gov/publication/44995
Cooper, David. “Raising the Federal Minimum Wage to $10.10 Would Lift Wages for Millions and Provide a Modest Economic Boost.” Economic Policy Institute, 19 Dec. 2013, www.epi.org/publication/raising-federal-minimum-wage-to-1010/.
Doucouliagos, Hristos, and T.D Stanley. “Publication Selection Bias in Minimum-Wage Research?A Meta-Regression Analysis.” BJIR, Jun. 2009, onlinelibrary.wiley.com/doi/10.1111/j.1467-8543.2009.00723.x/epdf?r3_referer=wol&tracking_action=​preview_click&show_checkout=​1&purchase_referrer=​www.google.com&purchase_site_license
Perry, Mark. “Some minimum wage research showing negative effects on both the demand and supply side.” AEI, 8 Dec. 2014, www.aei.org/publication/minimum-wage-updates/
Purdue University. “Study: Raising wages to $15 an hour for limited-service restaurant employees would raise prices 4.3 percent.” Purdue University, 27 July 2015, www.purdue.edu/newsroom/releases/2015/Q3/study-raising-wages-to-15-an-hour-for-limited-service-restaurant-employees-would-raise-prices-4.3-percent.html
US Census Bureau. “Poverty Thresholds.” US Census Bureau, 9 Jan. 2018, www.census.gov/data/tables/time-series/demo/income-poverty/historical-poverty-thresholds.html
Williams, Sean. “Bernie Sanders' plan to raise the minimum wage has plenty of flaws.” Business Insider, 23 Aug. 2015, www.businessinsider.com/bernie-sanders-plan-to-raise-the-minimum-wage-has-plenty-of-flaws-2015-8