The Minimum Wage Debate

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The Minimum Wage Debate

$15 minimum wage increase has been a national debate for many years. In 2013, the 44th President of United States, Barack Obama called for raising the minimum wages to $9 per hour. This would have directly boosted wages of 15 million people by the end of 2015 and helped reduce poverty and inequality. Unfortunately the House of Republicans voted unanimously to defeat this bill. Since then, no specific minimum wage increase has been allowed a hearing in Congress.

There is an urgent need to reignite growth and revitalize the American economy. The U.S. government needs to retool the economy’s engine so that it can run at a higher, sustainable growth rate for the decades to come. The plan to reward work by raising the minimum wages was to strengthen the middle class. This would have helped to increase the worker productivity and consumer purchasing power in order to stimulate the economy. According to Dale Belman of Michigan State University and Paul Wolfson of the Tuck School of Business at Dartmouth, a moderate increase in the minimum wage would have helped to raise the earnings of low-income workers and reduce poverty without jeopardizing employment. A higher minimum wage will allow more families to realize the American Dream.

Basically, the low income workers work for small firms with small profits. These businesses will have to raise prices to pay their workers’ wages. It is predicted that a $15 wage would result in prices being increased by roughly 4%. It is the customers, not the business owners who will pay that cost. The minimum wage worker will now have increased spending power and financial freedom. Their increased spending will lead to higher demand for goods and services, which will mean higher wages, or more jobs being created. This is actually a virtuous cycle– when people have more money, businesses will have more customers and they will hire more workers.

But what about the skilled workers currently making around $15/hr or slightly more (mainly the teachers)? Higher wages means more people contributing via taxes and less on public assistance. More contributions to state funds means they will inevitably get a pay raise as well. Therefore, the minimum wage would initially have a substantial impact only on the wages of low-income workers. And slowly this will raise wages for millions more by causing a ripple effect. This will gradually increase the wages and create jobs across all industries including the highly skilled job trades and STEM careers.

The minimum wage hike to $15 therefore will bring more jobs rather than killing them. I strongly believe that there will be strong earning effects and no employment effects if the law is passed. Do you agree?

2017-10-09T13:05:24+00:00 By |Categories: Employment|Tags: , , |0 Comments