There are many political ideas that get bandied about today, and one of the most common is raising the minimum wage. The federal minimum wage is just more than seven dollars per hour today. Some states and cities have gone above this, installing a minimum wage as high as 15 dollars in some cases. There are many advocates who believe the right move is to raise the minimum wage at the federal level, requiring all employers in the US to pay their employees more. The idea is that people should be paid a so-called “living wage,” or an amount that allows them to pay for their basic necessitates if they happen to work full time. There are many pros and cons to this idea.
The pros of raising the minimum wage
The most obvious pro of raising the minimum wage is the positive effect it would have on people who are currently called the “working poor.” In the US, there are many people who work for minimum wage but cannot afford to live in their particular city. This means they either have to get a second job or take government assistance to get by. With a higher minimum wage, these people would be able to enjoy the fruits of their hard work.
Another pro is that raising the minimum wage would put more money into the economy. Some suggest that it would fire up America’s economic engine by increasing consumption. Raising the minimum wage is, in essence, a re-distribution of money from the very rich to the poor. The rich tend to put their money into investments and offshore accounts, while the poor are more likely to go to stores and spend it. This means that the American economy may benefit if working people had more money in their pockets to spend.
The cons of raising the minimum wage
One of the potential cons of raising the minimum wage has to do with the response of employers. Some employers will reflexively choose to fire some of their workers rather than paying the hire wage. They may choose to get by on much less in order to protect their margins. While it is likely that the economy would be fine with higher minimum wage over the long run, employers firing people in the near-term would likely have a detrimental effect on the economy. At the very least, it would lead to a short-term spike in unemployment.
In addition to that, a boost in the minimum age would cause many employers to shift their workers to salaried positions. There are many techniques that allow employers to just make their employees salaried, which would take away the possibility of earning overtime and lock employees into more work for less pay. Given that employers would inevitably be scrambling for ways to save money in light of the new law, it could also lead to more workers being replaced by machines. This is already happening in grocery stores and fast food restaurants. The effect could be exacerbated.