America is due for a minimum wage increase
Mary Psyhogeos • 13 October 2019
by Mary Psyhogeos
October 13, 2019
The 2019 federal minimum wage is $7.25. A decade ago, in 2009, the federal minimum wage was $7.25.
For the past ten years of growing inflation, an economy rebounding from a recession, dropping unemployment, increasing labor productivity, this wage - which affects the most economically insecure of our population - remains stagnant.
It can be debated at length the amount that the wage should be increased, or the intervals in which it should be changed, but what is indisputable is that something needs to be done. Millions of Americans cannot continue to be expected to survive on $7.25 because it simply isn’t possible.
Hundreds of studies point to the fact that a higher minimum wage would solve numerous problems and create very few. $7.25 is not a living wage. It puts any family in any area of the country beneath the poverty line and a raise would thus drastically decrease poverty rates. This would mean that the government could spend less tax money on benefits, and workers would be happier and more productive - a condition that leads to less employee turnover. The worry that a higher minimum wage will lead to job loss is not only false but the greater consumer spending as a result of higher wages will create jobs and stimulate the economy. A higher minimum wage would also reduce gender and racial income inequality, a fiscal problem in the United States that leads to a multitude of social ones.
October 13, 2019
The 2019 federal minimum wage is $7.25. A decade ago, in 2009, the federal minimum wage was $7.25.
For the past ten years of growing inflation, an economy rebounding from a recession, dropping unemployment, increasing labor productivity, this wage - which affects the most economically insecure of our population - remains stagnant.
It can be debated at length the amount that the wage should be increased, or the intervals in which it should be changed, but what is indisputable is that something needs to be done. Millions of Americans cannot continue to be expected to survive on $7.25 because it simply isn’t possible.
Hundreds of studies point to the fact that a higher minimum wage would solve numerous problems and create very few. $7.25 is not a living wage. It puts any family in any area of the country beneath the poverty line and a raise would thus drastically decrease poverty rates. This would mean that the government could spend less tax money on benefits, and workers would be happier and more productive - a condition that leads to less employee turnover. The worry that a higher minimum wage will lead to job loss is not only false but the greater consumer spending as a result of higher wages will create jobs and stimulate the economy. A higher minimum wage would also reduce gender and racial income inequality, a fiscal problem in the United States that leads to a multitude of social ones.
A Path to Decreasing Poverty
A higher minimum wage is necessary to decrease poverty and provide a living wage. It also must continue to adjust for inflation in order to keep pace with rising costs of living. 21 states and DC will raise minimum wage in 2019, proving that raises are possible and are being enacted with little negative consequence in many areas. |
The current minimum wage is forcing working citizens into poverty. Increasing the minimum wage to $15 by 2025 would lift 1.3 million Americans out of poverty and could result in a wage increase for 27 million workers |
The Fight for $15 Movement began in 2012 - $15 in 2012 is only worth $13 in 2019 and loses purchasing power with each year. What may have seen radical and excessive 7 years ago is now a much more reasonable request. Fast food workers began striking for this wage nearly a decade ago and still have not received a raise. Year after year, they watch the purchasing power of their request decrease until it, too, will be insufficient. A 2018 survey by the Economic Policy Institute found that a family of four in 2024 with two adults working 40 hours per week for $15 per hour won’t have enough income to meet the basic requirements for their family budget in any area of the country. The minimum wage must be raised to ensure that it is a living wage but must continue to follow inflation or the nation will never relieve itself from this cycle.
The current minimum wage, $7.25 per hour, is about $15,000 per year of full time (40 hours per week) work. The federal poverty line for a family of four is $25,000 - that’s $10,000 more than a minimum wage salary. Therefore, the current minimum wage is forcing working citizens into poverty. Increasing the minimum wage to $15 by 2025 would lift 1.3 million Americans out of poverty and could result in a wage increase for 27 million workers, according to the New York Times. The total annual wages for these workers would increase by $92.5 billion, or about $2,800 per worker. The Economic Policy Institute estimates that if there had been a $12 minimum wage in 2018, there would be 6.2 million fewer people living in poverty by 2019.
Raising the wages of these workers is necessary to improve the standard of living for hard working Americans. America should strive to have as few people living in poverty as possible and raising the minimum wage is the most direct way to do this.
Proven Possibilities
The United States can and should deliver a living wage to the millions of minimum wage workers because it has been done before. 50 years ago, minimum wage workers made 29% more than today, when adjusted for inflation. This is despite the fact that, according to the Economic Policy Institute, labor productivity indicates that the US has double the capacity to deliver higher wages now than they did 50 years ago. Had the minimum wage kept pace with labor productivity growth since 1968, it would be over $20 today. A $15 minimum wage in 2024 would have 28% the purchasing power the minimum wage had in 1968, but the country’s potential for higher living standards will have risen 119%.
If labor productivity has increased, why haven’t the wages? Minimum wage workers are doing their part to better this country and have received nothing in return. We should strive for higher, not lower, wages than decades ago - that is economic growth and the creation of a better life for future generations of Americans.
If the minimum wage is not raised and continues to remain stagnant as inflation eats away at purchasing power, this problem will only snowball as years advance and even $15 becomes unlivable. Heidi Shierholz, policy director at the Economic Policy Institute, believes that “as a group, low-wage workers would be just ambiguously better off” and that the “the bottom line is the benefits exceed the costs.” There is no doubt that a minimum wage increase would improve the lives of millions of workers and their families, an opportunity so promising that it is difficult to pass up. If the United States wishes to relieve poverty and ensure a living wage for all, it must begin with a minimum wage raise.
The current minimum wage, $7.25 per hour, is about $15,000 per year of full time (40 hours per week) work. The federal poverty line for a family of four is $25,000 - that’s $10,000 more than a minimum wage salary. Therefore, the current minimum wage is forcing working citizens into poverty. Increasing the minimum wage to $15 by 2025 would lift 1.3 million Americans out of poverty and could result in a wage increase for 27 million workers, according to the New York Times. The total annual wages for these workers would increase by $92.5 billion, or about $2,800 per worker. The Economic Policy Institute estimates that if there had been a $12 minimum wage in 2018, there would be 6.2 million fewer people living in poverty by 2019.
Raising the wages of these workers is necessary to improve the standard of living for hard working Americans. America should strive to have as few people living in poverty as possible and raising the minimum wage is the most direct way to do this.
Proven Possibilities
The United States can and should deliver a living wage to the millions of minimum wage workers because it has been done before. 50 years ago, minimum wage workers made 29% more than today, when adjusted for inflation. This is despite the fact that, according to the Economic Policy Institute, labor productivity indicates that the US has double the capacity to deliver higher wages now than they did 50 years ago. Had the minimum wage kept pace with labor productivity growth since 1968, it would be over $20 today. A $15 minimum wage in 2024 would have 28% the purchasing power the minimum wage had in 1968, but the country’s potential for higher living standards will have risen 119%.
If labor productivity has increased, why haven’t the wages? Minimum wage workers are doing their part to better this country and have received nothing in return. We should strive for higher, not lower, wages than decades ago - that is economic growth and the creation of a better life for future generations of Americans.
If the minimum wage is not raised and continues to remain stagnant as inflation eats away at purchasing power, this problem will only snowball as years advance and even $15 becomes unlivable. Heidi Shierholz, policy director at the Economic Policy Institute, believes that “as a group, low-wage workers would be just ambiguously better off” and that the “the bottom line is the benefits exceed the costs.” There is no doubt that a minimum wage increase would improve the lives of millions of workers and their families, an opportunity so promising that it is difficult to pass up. If the United States wishes to relieve poverty and ensure a living wage for all, it must begin with a minimum wage raise.
Saving Taxpayer's Money
Additionally, although higher wages cost more, a higher minimum wage will save government money on benefit programs. The Economic Policy Institute estimates that a $10.10 minimum wage would decrease the amount of Americans dependent on government assistance programs by 1.7 million. This would decrease annual government spending on income-support programs by $7.6 billion and, according to the Center for American Progress, $4.6 billion would be saved on SNAP (Supplemental Nutrition Assistance Program) alone.
That is tax money saved, which will benefit all Americans and the government. Decreased dependency on government assistance also shows that many Americans who could not support themselves on their wages could do so with $10.10 per hour. Raising minimum wage means that these millions of people are no longer reliant on government programs, which is quite the win-win for both workers and taxpayers.
Additionally, although higher wages cost more, a higher minimum wage will save government money on benefit programs. The Economic Policy Institute estimates that a $10.10 minimum wage would decrease the amount of Americans dependent on government assistance programs by 1.7 million. This would decrease annual government spending on income-support programs by $7.6 billion and, according to the Center for American Progress, $4.6 billion would be saved on SNAP (Supplemental Nutrition Assistance Program) alone.
That is tax money saved, which will benefit all Americans and the government. Decreased dependency on government assistance also shows that many Americans who could not support themselves on their wages could do so with $10.10 per hour. Raising minimum wage means that these millions of people are no longer reliant on government programs, which is quite the win-win for both workers and taxpayers.
An increase in the minimum wage from $7.25 to $10.10 per hour would inject $22.1 billion net into the economy and create an estimated 85,000 jobs in 3 years |
National Economic Growth
Opponents of a higher minimum wage fear that employers will not be able to afford as many workers and will therefore need to cut back on jobs. While this may be true on a small-scale, evidence suggests that the increased consumer |
spending as a result of higher wages actually creates many new jobs.
Economists from the Federal Reserve Bank of Chicago predicted that a $1.75 minimum wage increase would increase total household spending by $48 billion the next year. This consumer spending will increase overall GDP and grow the job market. According to the Economic Policy Institute, an increase in the minimum wage from $7.25 to $10.10 per hour would inject $22.1 billion net into the economy and create an estimated 85,000 jobs in 3 years. This may not only balance out the cost of higher wages and the possible jobs that could be are lost, but the stimulated economy will greatly benefit the American businesses and the overall country.
It has also been found that even the fear of lost jobs is possibly irrational. Paul Wolfson and Dale Breman of Tuck School of Business found that the average estimated effects of an increased minimum wage on employment were very small. The two also discovered statistical evidence for a negative bias towards publishing findings that show significant negative employment effects. This bias, they believe, skews the information consumed by the public and causes it to appear far closer to a consensus than it truly is. In reality, there is much pro-minimum wage evidence that is often overshadowed by this bias. Ellora Derenoncourt and Claire Montialoux of the Economic Policy Institute, for instance, found that the United States significantly increased the minimum wage during the 1960s (the highest period of US minimum wage in history) with no reduction of employment of low-income workers.
Evidence was also discovered by economists Alan Jrueger, PhD, and David Card, PhD, when they compared employment in the fast food industry after New Jersey raised its minimum wage by 80 cents and Pennsylvania’s remained the same. Krueger and Card observed that there was “no indication that the rise in the minimum wage reduced employment” and that job growth in the fast food industry was similar in both states. Indeed, this was further supported by economists Hristos Doucouliagos, PhD, and T.D. Stanley, PhD, after they found “little or no evidence of a negative association between minimum wages and employment” following a review of 64 minimum wage studies.
Thus, the belief that raising minimum wage may result in lay-offs and limited hiring abilities can not only be statistically and historically proven false, but it also wouldn’t greatly matter in the long run. Even if it were true, the increased household spending as a result of higher wages, which adds billions of dollars to the economy and creates tens of thousands of new jobs, effectively detracts from this argument.
Reducing Turnover and Increasing Productivity
Higher wages also solve one of the main issues in minimum wage businesses - unproductivity and high turnover. Businesses with high turnover rates suffer because new employees must be paid in training but cannot be as productive while being trained. Businesses must therefore pay for an extra employee per shift that cannot do the work and the workers training the new person also become less productive because their time is spent helping.
A 2014 University of California Berkeley study, however, found that turnover rates for teens and restaurant workers declined by about 2% after a 10% increase in minimum wage. A 2014 survey by the American Sustainable Business Council also found that 53% of small business owners believe that a higher minimum wage will decrease employee turnover and increase productivity and customer satisfaction.
That these employees will remain with the business for longer with higher wages proves that higher minimum wage elevates their happiness and satisfaction. Minimum wage workers making $7.25 are often unable to afford nutritious food and will have high levels of financial stress. Their increased happiness and productivity is proof that higher wages will make their lives easier. These lower turnover rates will then save businesses money, which they can use to cover the costs of higher wages, and make production faster and more satisfactory, from which all customers will benefit. A business of underpaid, exhausted, and stressed workers is not efficient for the employees, owners, or customers. If workers are paid more and can better focus on their work as a result, businesses will see economic benefits to raising wages.
Reducing Inequality
Yet another benefit of raising the minimum wage is the decrease in gender and income inequality. There is a common stereotype that minimum wage workers are mostly high-school students, but this is largely false. According to the Economic Policy Institute, a $15 minimum wage in 2025 would increase wages for 33.5 million workers. These workers are not teenagers or students - 30.1 million of them are over the age of 20 and 19.4 million of them are parents.
19.5 million are also women, as women make up 56% of minimum wage workers despite being only 48% of the US workforce. Increasing the minimum wage would improve the earnings of these women and help combat the gender income inequality that is so often discussed in regards to disproportionate levels of males in CEO or other prestigious - and lucrative - positions. This disparity begins at the bottom and, if a given amount of low-income women can make equal to the same amount of low-income men, it will level the playing field from the ground up and reduce the gaping differences visible at the top.
Additionally, about 40% of black workers and 34% of Hispanic workers would receive a wage increase from a $15 minimum wage. Increasing the subminimum wage for tipped workers, which has remained $2.13 per hour since 1991, would also provide a more stable income to these workers who are more vulnerable to wage theft and susceptible to racial discrimination. Increasing wages for so many people of color would improve the standard of living and help to decrease racial inequality. Higher wages would improve the school systems in areas that are mostly non-white, allowing the next generation greater opportunities for a better life. This, in combination with the many other advantages that a higher income will have for minimum wage families of color, will help to reduce the differences in wealth between races.
That the minimum wage workforce is disproportionately made up of women and people of color provides an opportunity to raise the wages of the people for whom financial breaks are the hardest to come by. It would help reduce both gender and racial income inequality, leading to a more equal nation and less disparity in gender, race, and income when comparing the rich and the poor.
It is clear that the minimum wage is a far cry from a living wage and increasing it would decrease poverty, government spending on benefits, employee turnover, and income inequality, while increasing production and creating jobs.
The benefits are obviously numerous and the few drawbacks exaggerated. The minimum wage should not become so high that it causes inflation to skyrocket, but a reasonable wage is necessary. For the last 50 years, the United States has ignored its low-income workers and let the minimum wage collect dust as inflation annually robs it of its little power. Americans need to remember those who do the millions of jobs that allow the country and its citizens to flourish. $7.25 is not high enough for any human to live, and currently it is the wage on which millions of Americans survive. Clearly, something needs to be done.