Stapley 1
Anna Stapley
Professor JolynneBerrett
English 1010
April 30, 2014
Raising the Minimum Wage: Good or Bad?
I have been researching the idea of raising the minimum wage. This is a crucial issue because it has once again come to the forefront ofthe political arena. One of the most important aspects of the debate is how raising the minimum wage affects our economy. I have found that there are four different schools of thought about this. Some are of the opinion that it is important that the minimum wage keep up with the increases in inflation. There are those that support the minimum wage hike, stating that it is not only good for business, but it also addresses income equality. Others believe that raising the minimum wage will actually hurt the employment landscape by incentivizing the automation of jobs. And lastly, there are those that argue that raising the minimum wage affects unskilled workersdisproportionately. With all of the differing ideas surrounding this issue, I hope to show that while it is attractive politically to raise the minimum wage, it is not always beneficial to the worker.
As to the issue of inflation, The White House Blog weighs in with the idea that as no one should have to live in poverty, we need to raise the minimum wage. As it stands, with the adjustment for inflation, they say that minimum wage is lower than when President Regan took office. The President argued that the minimum wage should be permanently tied to the rate of inflation so that people do not lose purchasing power over time (Sperlingnp).
Some proponents of the increase argue that with the adjustment for inflation, the minimum wage should be closer to $17 or $22 per hour (Greszlernp). According to the Heritage Foundation, however, it is all about how the numbers are analyzed. The fast food industry in particular, tends to have higher proportions of minimum wage earners. They say the numbers are right in line with the lower increases in productivity in the fast food industry compared to other industries over the same amount of time (Greszlernp).
There are those that believe that businesses have an advantage when they pay higher minimum wages to their employees. This concept is also often tied to the idea of addressing income inequality. Karen Klein and Nick Leiber of Bloomberg Businessweek talked to the chief executive officer of the U.S. Women’s Chamber of Commerce. Margot Dorfmansaid, “Our women [business owners] who pay a living wage have an advantage over their larger counterparts who don’t.” Klein states that the issue of income inequality is a growing concern for the public, and many small businesses recognize that the minimum wage must increase. They do acknowledge that many small businesses choose to hire at rates higher than the minimum required by law so that they can attract better workers.
The White House is also of the opinion that businesses benefit by paying higher than the minimum wage. They believe that paying workers more will reduce turnover of employees and reduce the costs of having to train new employees. President Obama sees the minimum wage as a tool that aids his agenda of reducing income inequality (Sperlingnp). The White House feels that paying a higher income not only benefits the worker, but the economy also, through increased spending.
There are differing beliefs when it comes to the increased spending that occurswith wage hikes, however. Maxford Nelson of the Seattle Times notes that while there are studies that show an increase of spending after an income hike, it is usually in the form of debt. This means for in the short term,spending increases, but for the long term it goes down again as the gains made in income go toward the new debt incurred.
Some believe that by increasing the cost of labor there is an incentive for companies to shed workers and rely on automation instead. It is noted that minimum wage is all about supply and demand (Dunkelberg). When the price of something rises, people buy less of it. The country of Bangladesh is cited as an example of this fact. They recently raised their minimum wage. There are many inefficiencies that plague the country, such as problematic shipping infrastructure, inefficient factories and frequent political upheavals. Dunkelberg concluded that Bangladesh was only able to win production contracts due to their previously low wages. They note that it is the productivity of a country that determines the wages. When production is down, wages follow. To make up the difference of increased labor costs, companies were forced to increase productivity. To do this, factories needed to get the same production from fewer workers. Ultimately, factory owners decided that it would be less expensive to invest in better machinery which would allow them to downsize their workforce by 10%. The repercussion is that while 630 employees will see a raise in their wages, 70 people will lose their jobs. They summarize that this law of economics is true for the US as well. If the cost of labor goes up, the demand for it will go down (Dunkelberg).
William Poole of the Cato institute echoes the idea of automation with an example of the effects the minimum wage increase of 1963 had. The DuPont company had offices in Wilmington, Delaware. At the time, elevators were run by an operator. It was shortly after the wage increase that the company overhauled their elevators to be fully automated and the elevator operators lost their jobs (Poole np). They note that companies will find automation more attractive as the minimum wage increases. For example, in a fast food restaurant, it will eventually be more cost effective for a customer to place an order on a computer than for a company pay a low skilled worker to push the buttons.
This begs the question, is it cost effective for a company to hire an unskilled worker? There are many that argue that it is the unskilled population that is most negatively affected by the wage increase. Itdisproportionately hurts teenagers and black Americans, as they tend to have higher numbers of less skilled workers (Jacoby np). While the national unemployment number is around 8.2%, unemployment for black Americans is currently at 14.4 %, teen unemployment is 24% and for black teenagers the number is 44% (Bureau np). Jacoby notes that while the federally mandated minimum wage is meant to affect employers, in actuality it constrains employees. Someone just entering the workforce cannot take a lower wage in order to convince a company to employ and train them. There are many teens and young adults who do not have high school diplomas or on the job skills. The author argues that the labor for these workers is worth less, maybe $5.50 an hour. Even though a high school dropout may want to work for this amount in order to learn and develop employable skills, federally mandated wages will not allow them to work for what they are worth. Lastly, he argues that simply passing a law does not raise the value of a person’s work.
Others also raise the concern over teen unemployment. In the Wall Street Journal, they state that over a two month period 330,000 teen jobs have disappeared. Since 2007 the minimum wage has risen just over two dollars an hour, and since that time the number of teens with jobs has decreased by 691,000. The Wall Street Journal references Labor Department statistics that minimum wage earners only account for 1.1% of the full time work force. Most employees earning the minimum wage are first time workers or part time employees. The Labor Department also reports that many employees that begin a job making minimum wage end up with a pay raise within a year. The Wall Street Journal argues that there should be an acceptable teenage wage that is lower than the federally mandated minimum. They state that this will help teenagers find work. The argument they conclude with is that, “the real minimum wage in this country has never budged, it is $0.00”
The debate over whether raising the minimum wage is beneficial or detrimental to the economy is a valid one. While on the surface it seems that raising the minimum wage would be good for the worker, I don’t think that it necessarily is. When did the minimum wage, the lowest amount a person could legally be paid,turn into an expected living wage? Even the name, “minimum wage” indicates that it is the very bottom of the income ladder, not the top of it. There is absolutely nothing that keeps business from paying a higher wage for a better employee, and as acknowledged by Klien, many do. The only workers affected by raising the minimum wage are the least skilled, least employable among us. As evidenced by both Poole and Jacoby they are also the most likely to end up unemployed. People now expect a “living wage” for flipping burgers (Kliennp). Ultimately, it is the business owner who is taking the all of the financial risk of a successful or unsuccessful company. The employee is always free to seek a job elsewhere, debt free. If we do not learn to control the urge to vote ourselves more of other people’s money, companies may literally decide to take their businesses elsewhere.
Works Cited
Dunkelberg, William. “Why Raising the Minimum Wage Kills Jobs.” Forbes. Web.(31 December 2012). 10 April 2014
Greszler, Rachel. “Minimum Wage has Followed the Productivity and Prices of Minimum Wage Jobs.” The Heritage Foundation.Web.(28 January 2014).10 April 2014
Jacoby, Jeff. “Minimum Wage Laws are Costly for the Unemployed.” The Boston Globe.Web.(11 July 2012). 10 April 2014
Klein, Karen and Leiber, Nick. “Higher Minimum Wage? Small Business Doesn’t Mind.” BloombergBusinessweek.Web.(21 February 2013). 10 April 2014
Nelsen, Maxford. “Does increasing the minimum wage stimulate the economy?” The Seattle Times. Web.(1 May 2014).1 May 2014
Poole, William. “Minimum Wage and Unemployment.” Cato Institute. Web.(15 January 2014). 10 April 2014
Sperling, Gene and Krueger, Alan. “Raising the Minimum Wage is Good for the Economy.” The White House Blog.Web.(24 July 2013). 10 April 2014
“The Employment Situation.”United States Department of Labor.Web.(June 2009). 10 April 2014
“The Young and the Jobless”.The Wall Street Journal.Web. 3 (October 2009). 10 April 2014