Twenty states and the District of Columbia have raised their minimum wages higher than the $7.25 federal rate. Part of HuffPost Politics. Post . Morningstar, Inc. All Rights Reserved. Living on the minimum wage is anything but easy. Today is National Voter Registration Day! Why we shouldn’t raise the minimum wage Raising the wage will make it more expensive to hire younger and low-skill workers. Others will find themselves out of work because their employer can only support a certain amount of labor expenses. Entry-level workers are suddenly making as much as experienced workers. people would get a shot at proving themselves”. Here are a few. With a higher minimum wage available, some students may decide to stop going to school to enter their chosen vocation. In many cases, it will completely price these individuals out of the workplace. simplistic. That process can limit the number of opportunities available for people who only have a high school diploma, recent college graduates, or workers who are re-entering the labor force after an extended stay away from it. Why $15? results in job loss has been proven wrong and too Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. It's an obstacle. Making it illegal to hire low skilled workers—which is all minimum wage laws do—does nothing to help this. Sign up for membership to become a founding member and help shape HuffPost's next chapter, Register to vote and apply for an absentee ballot today. Many agree that a SMALL increase won’t. Raising the minimum wage to $15 an hour would be a boon to some workers, but the aggregate effect would be overwhelmingly negative. That means some employees will make more because of the mandated pay raise. If the president is serious about investment, why doesn't he find savings in serious entitlement reform? If the president is serious regarding social mobility, why does he revel in wealth transfers from the youngest Americans to the oldest? At the defining level, the 'raise' argument assumes that by transferring income from a higher income consumer to a lower income employee, savings are transferred to those with a higher marginal propensity to consume (MPC). So even without a partner or kids, people are barely living above the poverty line. At a national level, the cents quickly add up. It's a shame that governments have to step in and dictate what a business should be paying its workers. But, going from $7.25 to 15 is NOT small. Since 2009, the primary gains in wages and income have been within the top 1% of the U.S. economy. redistributing profits and adapting prices”, “Even if employers give workers fewer hours, In contrast, of the thirty-three studies we identify as providing the most reliable evidence, more than 80 percent point to negative employment effects. In the United States, the Federal minimum wage is $7.25 per hour. It can improve tax revenues. are offset that don't include losing jobs, including For Hispanic women, the disparity between what she and a Caucasian male make in the same position is even greater at just 54.4 cents to the dollar. 8. It may encourage a move toward automation or self-service. How did it affect them? It’s more than double! We’re already seeing the effects of automation and self-service at stores. It's just that there are far better alternatives than increasing the minimum wage. Disclaimer. It may encourage labor outsourcing. BY GARY WOLFRAM -- Bernie Sanders and those who support a minimum wage do not observe the unintended effects of the law. A bunch of workers would get bigger checks while Performance & security by Cloudflare, Please complete the security check to access. Creating more jobs, or converting more half-time positions into full-time positions, may have a larger economic impact than simply raising wages. It gives workers more localized spending power. The polls reflect this understanding -- a 'raise' seems to be the perfect servant of social mobility. If people are choosing to be under-employed, then they will continue to live in poverty, no matter what the minimum wage happens to be. It was initially set at $0.25 per hour and has been increased by Congress 22 times, most recently in 2009 when it went from $6.55 to $7.25 an hour. It can reduce the need for welfare programs. You can change your choices at any time by visiting Your Privacy Controls. Economists have been arguing for DECADES about whether or not raising the minimum wage kills jobs. So what are the effects of increasing minimum wages? You may need to download version 2.0 now from the Chrome Web Store. Many people have recognized the negative consequences of letting the minimum wage dwindle to insignificance. It may even increase the overall cost of living for everyone in the community, which then creates a cycle where an even higher minimum wage would be required to help people make ends meet. 1. former advisor to John McCain & Mitt Romney, “Lifting the minimum wage would result in job loss. • It may encourage labor outsourcing. All times are ET. If minimum wages reduce employment of low-skill workers, then minimum wages are not a “free lunch” with which to help poor and low-income families, but instead pose a trade-off of benefits for some versus costs for others. It can tighten the employment market. Depending upon on how high the minimums are raised, some supervisors might find themselves earning the same amount as their direct reports. Morningstar: © 2018 4. Looking at both these articles gives the notion that our President has agreed with raising the minimum wage. Tap here to turn on desktop notifications to get the news sent straight to you. On July 18, 2019, the U.S. House of Representatives passed an amended version of the Raise the Wage Act of 2019, which would gradually increase the federal minimum wage to … Please, enable JavaScript and reload the page to enjoy our modern features. There are even two states that have a lower minimum wage compared to the national rate, though the $7.25 would still be required there. Evidence regarding the effects on workers initially paid at or just above the minimum suggests that their labor income declines as a result of minimum wage increases, reflecting negative effects of minimum wages on employment and hours. A raised minimum wage seems so logical, so morally clear; a small measure of support for those who need it most. They might create application screens which require applicants to have a specific degree or a length of experience for a job that minimum wage workers may not possess. They focused on five areas: the effects of minimum wages on employment, minimum wage effects on the distribution of wages and earnings, the effects of minimum wages on the distribution of incomes, the effects of minimum wages on skills, and the effects of minimum wages on prices and profits. Factset: FactSet Research Systems Inc. 2018. 2. Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. If the president is serious about increasing the number of well-paying jobs, why won't he lift the lid on an American energy boom? Privacy Policy. The federal poverty line for a family of one is $12,760 a year. Image Credit: Flickr-Fibonacci Blue | CC BY 2.0 (https://creativecommons.org/licenses/by/2.0/), 72 percent of US-based economists oppose a federal minimum wage of $15.00 per hour. By raising the minimum wage, the reliance on programs such as these can be reduced. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 As workers gain experience, there is a need to pay them more. We and our partners will store and/or access information on your device through the use of cookies and similar technologies, to display personalised ads and content, for ad and content measurement, audience insights and product development. Print . As Kendall Fellis of the Service Employees International Union explained, “Ten dollars was too low and $20 was too high, so we landed at $15.”. This creates a scalability issue which can negate the impact of the higher minimum wage. There are too many people who depend on a low-wage It could reduce poverty. Tipped employees must receive $2.13 per hour in cash wages and ensure that the $7.25 per hour minimum is met. Businesses can decide to outsource their labor needs to a country where the labor costs are much lower. Share It. Even though a higher minimum wage may be in place, that standard does not apply to every country in the world. The majority of surveyed economists believe a $15.00 per hour minimum wage will have negative effects on youth employment levels (83%), adult employment levels (52%), and the number of jobs available (76%). And so far, we haven't seen it. The federal minimum wage was introduced in 1938 during the Great Depression under President Franklin Delano Roosevelt. Do you have information you want to share with HuffPost? Email . with less experience because it's a big investment. 17 France Healthcare System Pros and Cons, 18 Major Advantages and Disadvantages of the Payback Period, 20 Advantages and Disadvantages of Leasing a Car, 19 Advantages and Disadvantages of Debt Financing, 24 Key Advantages and Disadvantages of a C Corporation, 16 Biggest Advantages and Disadvantages of Mediation, 18 Advantages and Disadvantages of a Gated Community, 17 Big Advantages and Disadvantages of Focus Groups, 17 Key Advantages and Disadvantages of Corporate Bonds, 19 Major Advantages and Disadvantages of Annuities, 17 Biggest Advantages and Disadvantages of Advertising. Correspondingly, 'raise' supporters claim that the economy will benefit from the multiplier effect born of increased consumer activity. In actuality, they restrain economic mobility and penalize personal responsibility. It could encourage more student dropouts. and/or its affiliates. Most workers, in fact, see real wages increases after the minimum wage is increased. 1. List of the Pros of Raising the Minimum Wage. Another reason most economists oppose a $15 federal minimum wage is that the balance of empirical evidence suggests minimum wage hikes fail to achieve the policy goals they are intended to. By increasing the minimum wage, an increased tax pool is created, which generates more revenues for needed services in each community. The polls reflect this understanding -- a 'raise' seems to be the perfect servant of social mobility. But the subsidies make it so taxpayers share the burden For start, while wage-raise supporters claim that a raise would avoid negative employment aftershocks, the economic data suggests otherwise. When workers can earn a similar wage without experience compared to those with experience, it creates a disincentive for workers to pursue further training opportunities. Ultimately, raising the minimum wage isn't an avenue to a fairer, more prosperous America. and economic adviser to Vice President Biden, “The 'simple textbook prediction' that raising wages Here are the pros and cons which are associated with raising the minimum wage. We also need greater funding for government sponsored skills programs -- especially those that operate at irregular hours (so that service industry workers can attend outside of their work schedule). There are also economic concerns which may develop over time that could negate the positive impacts that a raise in the minimum wage creates. The Economic Policy Institute stated that a minimum wage increase from the current rate of $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. 1. Find out more about how we use your information in our Privacy Policy and Cookie Policy. First, we need to ensure that greater in-house training/promotion opportunities are offered to those who work in low wage positions. Most importantly, we need an education system suited to the 21st century -- no longer can good schools be the preserve of mostly wealthy counties. Should the minimum wage be raised? Families have access to more discretionary income, which gives them a chance to support more businesses. 4. That means the people who need the money gain the opportunity to meet their basic needs more effectively.