The Pros And Cons Of Raising Minimum Wage

Minimum wage has been a topic of debate for many economists since it was established in 1938. The public policy of minimum wage was created within the Fair Labor Standards Act to ensure employees receive “fair” wages. There are many pros and cons to minimum wage depending on which economical perspective one is addressing it from. The idea behind minimum wage is to prevent the working poor from going under the poverty line. Without a minimum wage there is little incentive for employers to pay their employees much at all. When minimum wage was first introduced the argument was that many claimed that it was unconstitutional to tell businesses how to pay their employees. Now, the debate surrounding minimum wage is less about if there should be

Economists against the public policy say that both the businesses and the unskilled workers will suffer from an increase in the wage floor. They claim that if minimum wage is raised then companies would need to compensate for having to pay their employees higher wages. Companies may do so my cutting its employee’s hours, benefits, and training or by just laying off the employees entirely (Perry). Another potential problem is that businesses may increase prices which would affect everyone else. These are the claims that economists against raising minimum wage commonly make, insisting that it would only hurt the economy. In fact, the nonpartisan Congressional Budget office releases an article titled, “The Effects of a Minimum-Wage Increase on Employment and Family Income,” the report claims that there are a couple inevitable affects the wage floor increase will have. It says that in a scenario were the minimum wage is increased to $10.10 they estimate that about 500,000 jobs would be lost, but around 16.5 million minimum wage employees would see a substantial increase in their average pay. In another scenario they estimate the effects of a wage floor of $9.00 which resulted in a reduction of only 100,000 jobs, but in turn only 7.6 million minimum wage workers would see a pay raise (Wihbey). This study shows that if the wage floor rises it may result in the loss of thousands of jobs,

These economists say that a higher minimum wage would give working people more buying power, therefore, putting more money into the economy and decreasing poverty levels (Tucker 14). Some even report that the more spending people would do with a higher wage floor would actually increase employment to keep up with demand or since the workers are being paid more there will be a lower turnover rate which would benefit employers (Burglund). A study conducted by four economists, Michael Reich, Sylvia A. Allegretto, Ken Jacobs, and Claire Montialoux, showed the effects of a $15.00 minimum wage in New York on workers, businesses, and consumers by mid-2021. The results of their study showed that workers across the board, even individuals that were already paid over the wage floor, would see very significant increases in their earnings. They also predicted that business’s turnover rate reductions, increases in employee productivity, and automation would make up for almost all payroll cost increases for them. As for consumers, although they may expect a small increase in price ranges, will essentially not be affected at all (Michael Reich, Sylvia A. Allegretto, Ken Jacobs, and Claire