The debate over raising the federal minimum wage divides the whole country. Some contend that raising it will hurt jobs and raise costs while others hold that it won’t let people earn enough to reasonably sustain themselves. Is raising the minimum wage good or bad for the country as a whole?
Don’t raise the federal minimum wage:
It causes job losses
In a free market, salaries are as high as the jobs that earn them are valuable. By forcing companies to raise salaries higher than the output of such jobs, they will be forced to discontinue them. No longer able to make a profit, companies would have to send some workers home without any job at all, rather than giving them a steady income. Low-income workers would be at the highest risk of being fired since their work wouldn’t be profitable any longer. A 2010 study estimated that raising the minimum wage to $9.50 would end nearly 1.3 million jobs. This article argues that Seattle has already started losing jobs due to its raised minimum wage.
It raises prices for consumers
By raising the minimum wage, we force businesses to make up for the loss of capital somehow. Often their only way to offset this deficit is by increasing prices for consumers. If we force them to pay a higher minimum wage than they would have naturally, the prices for consumers of all goods and services go up. This will hurt consumption and business profits, from which the government will reap less taxes.
The market is best at determining wages
It is widely believed that America’s free market model is a big reason for its economic successes. If a job requires little skill then the salary stays low. If a job is complicated, for example being a biological engineer, then the salary is appropriately high to encourage people to pursue that career. Not only is this fair it also encourages people to go for jobs that will benefit society. Market-determined wages make people work hard to become doctors or engineers, which provide a much-needed service.
Raise the federal minimum wage:
It will go right back into the economy
America’s poor often can’t afford to save their money, they need to spend it right away, so it goes towards businesses. Money being spent increases the general cashflow and benefits the economy. According to research done at Per Capita rich people are far more likely to save their money, putting it in the bank, where it serves the economy less. Raising the minimum wage helps businesses by allowing more Americans to buy their products.
It reduces income inequality
The 20 richest Americans own as much wealth as the bottom half of the country combined. The US lags far behind other developed countries in terms of income inequality. A plan to raise the minimum wage to $12/h by 2020 would lift 4.5 million Americans out of poverty. Income inequality has been shown to fuel social tension so reducing it is in everyone’s best interest. Besides being the morally compassionate thing to do, it would allow America to become a more equal and fair society.
It will benefit the children of poor families
“A nation’s greatness is measured by how it treats its weakest members.” – Mahatma Ghandi
Children born into poverty are among those that deserve their bad fortune the least. Studies have shown that children, which grow up in poor households are far more likely to do badly at school, suffer from depression and poorly integrate into society. Through improving the living standards of poor children and giving their parents the disposable income needed for school supplies and tutors, a new generation of successful Americans can rise. Helping America’s poor children is a long-term investment in the country’s future.
The Bottom Line: Flat out raising the federal minimum wage to $15 an hour like some have proposed would have adverse effects that aren’t obvious at first. Making such a drastic change could seriously hurt America’s businesses and economic stability. On the other hand, the US has to fix its gaping inequality problem, too many Americans are still below the poverty line. For better or worse raising the minimum wage would put more money in their pockets, which would likely go back into the economy and improve their children’s lives.