Should the minimum wage be increased?
With the federal minimum wage lagging far behind some states’ mandated levels, liberals and conservatives have been arguing about whether a higher hourly wage would actually bring more benefits than what it costs.
Rise of the Issue
The minimum wage is the lowest hourly wage that employers are legally required to pay their employees. It was introduced in the United States with President Franklin D. Roosevelt in 1938 in the context of the Great Depression as a way to help and protect low income workers during these hard economic times.
Since then, the federal minimum wage has gradually been increased up to the $7.25 hourly rate where it currently stands. The minimum wage debate has gained more public attention ever since the Biden administration has set a legislative goal to raise the federal minimum wage to $15 by 2025.
Overall, the debate revolves around five micro issues: low-income workers, economic inequality, unemployment, poverty, and inflation.
Minimum Wage is Ruled Unconstitutional
Among other decisions striking down laws regulating business, during the Lochner era, the U.S. Supreme Court deemed all state-level minimum wage laws unconstitutional.
Massachusetts Passes First Minimum Wage Law
After strikers stopped work at textile plants in response to poor conditions, the state passed a minimum wage law pertaining only to women and children.
The Fair Labor Standards Act is Upheld
The Supreme Court upheld the national minimum wage law included in the Fair Labor Standards Act, deeming it within Congress’s power under the Constitution.
The Fair Minimum Wage Act
In the wake of the 2008 financial meltdown, the 2007 amendments incremented the hourly minimum wage rate from $5.85 in 2007 to $7.25 in 2009.
California Raises Minimum Wage to $15
New York City and Washington followed suit, and several other states hiked their minimum wage as well.
Raise the Wage Act
The House of Representatives passed a bill raising the minimum wage to $25 by 2025.
Calculating Economic Equality
While many believe that raising the hourly rate that workers are paid will increase their income, others point out that it is not so much the amount of money earned per hour that matters but how much money a worker makes in total that truly counts.
Low Income Workers
The proponents of the federal minimum wage argue that imposing such a minimum will help the most vulnerable workers by protecting them from a low income, while its opponents believe that raising their hourly rate doesn’t change the degree of inequality these workers face.
While its proponents don’t believe that raising the minimum wage creates more unemployment in the long-run, its detractors argue that it incentivizes businesses to either eliminate or replace their workers.
Cycle of Poverty
Some think that by raising the minimum wage it instantly raises millions out of poverty, while others argue that that is not what is happening in the long-run.
While some believe that because the minimum wage is not tied to inflation, the protection it provides will inevitably always fall behind the real cost of living, others believe that the minimum wage actually works as a safety net against inflation.
A higher federal minimum wage guarantees economic equality for all.
Having a higher minimum wage ensures that every U.S. worker earns a fair income that allows for a decent standard of living.
A higher minimum wage helps low income earners.
Raising the minimum wage is a way to help the most vulnerable part of the population out of their difficult economic reality.
Raising the minimum wage does not create unemployment.
Some studies have shown that states that have put a higher minimum wage in place didn’t see a rise in unemployment. The raise only forced employers to better accommodate their workers.
The minimum wage protects workers from inflation.
Raising the minimum wage serves as a way to keep up with inflation and thus guarantee that with time, as the cost of living goes up, workers do not lose their purchasing power.
Raising the minimum wage gives workers more money to spend.
The higher the wage people earn, the more they will be able to spend on both necessary and leisurely products and services, thereby boosting the economy.
A higher minimum wage could be an incentive to cut off jobs.
By forcing businesses to pay their workers higher wages, businesses might not want or be able to continue having the same labor force and will therefore eliminate jobs.
Raising the minimum wage might reduce workers’ number of hours.
By raising the hourly rate that workers are entitled to, it might push businesses to reduce the number of hours they ask their employees to work. In the worst case scenario, such a cut in hours might also mean a cut in monthly income.
The minimum wage might force low income workers to have multiple jobs.
If businesses employ their workers for fewer hours because of the hourly rate raise, it means that low income workers who cannot afford the cut in their hours will need to get multiple fewer-hour-jobs, which thus further increases the inequality they face.
The federal minimum wage does not help with inflation in the long-run.
While imposing a minimum wage may help workers keep up with inflation in the now, it doesn’t protect them from inflation going up in the future.
A higher minimum wage could be an incentive for automation.
As the price of labor keeps rising, together with technology’s rapid progress and expansion, it gives businesses more incentives to find ways to replace costly workers by investing further in technology.