$15 Minimum Wage
The Raise the Wage Act of 2017 was introduced into the Senate last May. This act proposed a gradual rise in the minimum wage to $15 by 2024. Even Though it did not move on, this Act brings up the debate over whether we should introduce a $15 minimum wage. This is an incredibly polarizing issue with varying viewpoints.
California, New York, and the District of Columbia have approved a minimum wage of $15. While Washington, Oregon, Colorado, Arizona, Maine approved minimum wages ranging from $12 to $14.25. Their central argument for this introduction is that it will benefit Americans. Specifically, it will raise pay about $3,500 a year for 30% of the US workforce, reverse pay inequality between the middle class and lowest paid workers, and benefit people of color. Individuals against the introduction of a $15 minimum wage don’t dispute these statistics. Rather they believe that the introduction of a minimum wage would burden businesses and the economy. In response, proponents of the $15 minimum wage commonly say, “The injection of higher wages will help stimulate the economy and spur greater business activity and job growth”. They further add that if the minimum wage had been raised at the same pace that the economy grew at, then our current minimum wage would be $19. This refutes the idea that raising the minimum wage is fiscally detrimental. Furthermore, research studies have shown that a moderate increase in the minimum wage would not lead to greater job losses. Additionally, they argue that businesses who are paying their employees the current minimum wage are putting a strain on the taxpayers. Specifically, lower paid workers are forced into safety net programs, such as welfare, that costs taxpayers more than $150 billion per year.
Individuals who are against raising the minimum wage to $15 justify their decision through economics. Their train of thought is that when the government forces a raised minimum wage, businesses have to raise prices. Because of this customers buy fewer goods, which leads businesses to move less product. This reduction ultimately leads the businesses to use less labor and fire individuals. Employers will not be able to employ as many people because they want to be competitive with neighboring areas. Individuals also argue that companies will have to go out of business because they will not be able to find the right combination of people to satisfy costs. This job loss will mainly be felt by people on the lower social latter. Additionally, individuals like David W. Kreutzer, a senior research fellow at the Heritage Foundation, believe that the minimum wage is not ambitious enough and that we need to Reduce economic policies that “penalize business growth and investment”. Overall, the debate over the minimum wage is very complex, however, it seems that the proponents of the minimum wage incorporate a more holistic view while coming to their conclusion. On the other hand, opponent focus much more heavily on specific economic effects, rather than the big picture.
This is a really interesting topic and I really liked how you connected it back to the Econ topics we learned about. It is especially interesting how those against the minimum wage use reasoning that the businesses won't be able to support themselves if the wages of their workers increased, yet the economy is growing faster and you stated that the minimum wage should be at $19 if it would grow as fast as the economy is right now. There are also bigger, more important reasons for raising the minimum wage such as shortening the wage gap between middle and lower class workers.
ReplyDeleteI like how, in this blogpost, you used what we learned about economics being a theory and not a fact, and mentioned that what is predicted might not happen. I think a big reason for how difficult it is to predict how a price floor on labor would affect the market is how unique labor is, as a product. Both demand and supply are pretty inelastic and it acts like a complementary product to all normal good and like an alternative good for inferior product. When the price of labor increases, the wages of workers do to, which is why the demand of normal goods increases, as if they were a complimentary good, and the demand for inferior goods decreases. I also like that you emphasized a holistic view which takes into account the most factors when predicting the effect of a price floor. I think it would also be interesting to discuss what would happen because of the surplus of labor that should theoretically occur when the price is higher than the equilibrium price and whether the consumer or the producer of labor will carry more of the burden.
ReplyDeleteYes, I read an article earlier this year regarding the debate on raising minimum wages. As you said, opponents believe that raising the minimum wage will cause companies to hire less people or even layoff workers to reduce their costs. In fact, some believe that raising the minimum wage could also encourage employers to turn to automated processes rather than human resources. However, this small increase in the minimum wage didn't result in huge job losses. It actually helped increase the living standards of the poor. If the minimum wage increased significantly more, then maybe it would be a different situation.
ReplyDeleteI thought you did a tremendous job approaching both sides objectively and concisely. I agree with you that it appears as though overall, more broadly, that citizens will benefit more than they will be hurt by an increasing minimum wage. Just recently, Amazon imposed their own $15 minimum wage internally, which poses a new challenge in the market. With lower unemployment, along with more competitive jobs, companies are being forced to accept higher, non-government enforced minimum wages to ensure they can have the labor forces necessary to accomplish their shipping goals.
ReplyDeleteSource: https://www.theatlantic.com/ideas/archive/2018/10/how-amazons-15-minimum-wage-could-shake-economy/571930/