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The Pros And Cons Of Raising Minimum Wage

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Raising the Minimum Wage and How It Impacts the Economy
Executive Summary In 2014 during his State of the Union Address, President Barack Obama announced a proposed raise to the minimum wage from $7.25 per hour to $10.10 per hour. Speculations on the economic impact to the United States were not in short supply, and were strongly argued for and against on this sensitive issue.
Introduction
The federal minimum wage has been around since President Franklin Delano Roosevelt enacted the bill in 1938. At that time, the minimum wage was set at $0.25 per hour. The Fair Labor Standards Act was created to help support a U.S. economy that was just coming out of a terrible economic depression. Bose (2017) states “since FDR’s first federal minimum wage …show more content…

Employees that are earning a higher wage will be able to spend the additional monies they have earned; thus, a positive stimulus to the U.S. economy. Cooper (2013) research states “that a minimum wage increase from the current $7.25 an hour to $10.10 would inject $22.1 billion net into the economy and create about 85,000 new jobs over a three-year phase-in period”. In the short term, a minimum wage increase will help stimulate an economy.
Increase in Jobs Available With a higher minimum wage being instituted, more monies will be available in the economy to be spent on consumer demands. This will have a direct effect on companies needing to manufacture more goods or provide more services for consumption. To meet this increase in consumer demand, companies will need to hire more employees to manufacture these goods or to provide these services. This ripple effect will allow previous unemployed people to secure a job and a …show more content…

Raising the minimum wage inflates the value assigned to these employees at the expense of seasoned employees. In other words, existing minimum wage employees and those unemployed people who were unwilling or unable to find employment for jobs at $8, $9, and $10 per hour now must compete for minimum wage jobs at $10.10 per hour against existing lower wage employees that were already making a higher wage than the previously existing $7.25 per hour. The lower wage employees have more experience and have already demonstrated they have a better skill set than the incoming new workers. This just helps further support the weight companies place on the importance of an employees’ skill set in relation to their assigned

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