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To Raise or Not to Raise: Minimum Wage

The purpose of minimum wage is to protect employees from exploitation. Employees

should receive reasonable pay to support their basic needs. However, the minimum wage has

been a controversial topic for years. People argue about whether the minimum wage should

stay at its current rate of $7.25 or increase to $15 an hour. As the cost of living goes up every

year, President Biden and labor advocates support increasing the minimum wage to $15 an

hour. Although some of the states have increased the minimum wage to $15 an hour,

economists worry about whether there are some negative impacts of raising the national

minimum wage to $15 an hour. They think raising the minimum wage will harm low-wage

workers and small businesses as well as increase costs to the consumer; a better solution to

the issue of income inequality is to increase earned income tax credits (EITC), expand wage

subsidies, and offer training programs.

In the beginning, the idea of minimum wage was to protect women workers and child

laborers from unfair treatment at work. During the Great Depression, people had an intense

fight about minimum wage. The Great Depression heavily impacted the US laborers,

especially low-income farmers and factory workers. To help workers out of poverty and help

the economy to recover, President Roosevelt promoted a set of social programs and urged

Congress to pass the minimum wage laws. In his speech “A Fair Day's Pay for a Fair Day's

Work,” he said “Our nation should be able to devise ways and means of insuring to all our
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able-bodied working men and women a fair day's pay for a fair day's work… government

must have some control over maximum hours, minimum wages...” At the same time, the

drive for minimum-wage laws was put in gear. In 1938, Congress passed the Fair Labor

Standards Act (FLSA), the minimum wage started at $0.25 an hour. In 2009, the minimum

wage increased to $7.25 an hour. The minimum wage has remained at $7.25 since 2009 until

today.

Some people argue that raising the minimum wage is the best way to get people out of

poverty. When the cost of living is going up every year, it is hard for low-wage workers to

make ends meet without relying on welfare. The low-income workers struggle with their

finances and paying for their basic needs, let alone supporting their families. They are unable

to afford to eat at restaurants; they can only serve their children with cheap and unhealthy

food. Sometimes, they do not know how to pay for their next meal. The article “Stressed,

Unsafe, and Insecure: Essential Workers Need A New, New Deal” by Clare Hammonds et.

al, from the University of Massachusetts Amherst, talks about the job equity for essential

workers and what difficulties they have to face during a pandemic. Hammonds et. al, stated,

“A living wage for one adult with no children in Massachusetts is about $15 an hour. For two

working adults with two children, it is about $20 an hour” (Hammonds et. al). It is difficult

for low-income labor to pay their own bills at the current minimum wage rate, let alone for

them to get their families out of poverty.

While it is true that poverty is a serious issue, raising the minimum wage is not the

solution; on the contrary, it may actually increase poverty. Only a certain number of workers

will be affected if the minimum wage is changed because most low-income workers are not

the main breadwinners who earn money to support their families, so it does not help them to

raise the minimum wage. The article, “Six reasons to oppose a $15 federal minimum wage”

by Skorup Jarrett, the director of marketing and communications at the Mackin Center for

Public Policy, talks about the negative effects of raising the minimum wage to $15. Skorup

writes “Most people who earn low wages aren't living in poverty, in fact, most live in

families earning more than the average U.S. income. That's because most are the second

income earners in a family, not the primary one...Only 10 percent of adults in poor

households work full time” (Skorup). The goal of raising the minimum wage is to help low-

wage people and their families out of poverty, but if raising the minimum wage does not help

the majority of low-wage workers and their families out of poverty, then it will be

meaningless to raise the minimum wage. What is even worse, raising the minimum wage

might increase poverty. People who have more experience and higher education will not be

willing to do low-paid work. Once the minimum wage increases, they will consider doing the

previously low-paid work. When the market becomes competitive, low-skilled workers will

have difficulty finding a job or even lose their jobs. George Reisman, a professor Emeritus of

Economics in Pepperdine University, in his book Capitalism: A Treatise on Economics, talks

about the characteristics and worth of laissez-faire capitalism, states “with every forced

increase in wage rate, the jobs of the less skilled became attractive to a large number of more

skilled workers, who otherwise would not have considered them” (432). This means that

employers are more likely to hire experienced workers, leaving unskilled workers

unemployed.

Supporters think raising the minimum wage will reduce turnover rates and increase

employees’ productivity which is beneficial to small businesses. It will save small businesses

a lot of money on training new employees. If employees are satisfied with their pay, they will

be more willing to work harder. In the article “Nothing Golden about Minimum Wage’s 50-

year Anniversary” by Holly Sklar, the CEO of Business for a Fair Minimum Wage, the

author argues that increasing the minimum wage will benefit small businesses. Sklar states,

“Low pay typically means high turnover. With reduced turnover, businesses see substantial

savings in recruiting and training costs. They see less product waste, lower error and accident

rates, increased product quality and better customer service.” If the pay is adequate,

employees are more likely to stay for a longer time. Also, they will be more productive in

their work and maximize business’ profits. With higher pay, employees will have less stress

about how to support themselves and their families.

Although higher pay might make employees more productive and beneficial to small

businesses, it could also harm small businesses. When the minimum wage increases, some
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small businesses will not be able to afford the higher pay. They will either close, cut

employee hours, or lay off employees. In a 2013 interview in “$15 minimum wage means

layoffs: White Castle exec.” with CNBC, Jamie Richardson, Vice President of fast-food

establishment White Castle, suggested that a $15 federal minimum wage would force his

company to close nearly half its locations and lay off thousands of workers (qtd. in

Sandholm). Raising the minimum wage will be a burden to small businesses. It will not only

force small businesses to shut down, but also lay-off low-paid workers.

Supporters think raising the minimum wage will stimulate consumers to spend money

and boost the economy. When low-wage workers receive more money, they will have money

to spend on their basic needs such as food, rent, and health. They would be likely to spend

money on the items that they previously were not able to afford. The article “Raise Federal

Minimum Wage to Aid Our Economic Recovery” by Ashraf Hijaz, owner of Beauty and

Beyond, claims that higher wages will stimulate consumer demand and grow the economy.

Hijaz states, “During my nearly 20 years in business, I've learned a key lesson: When people

make more money, they spend more money, and that's good for business”(Hijaz). According

to this perspective, this means increasing the minimum wage will also increase purchasing

power and strengthen the economy.

Opponents, on the other hand, argue that raising the minimum wage will cause

businesses to pass on the increased cost of labor to their customers. Businesses need to make
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profits to pay their employees and to pay their bills. When they have to pay more for their

employees, they will have no choice but to increase the price of their products and the

services they provide. It will lead to the cost of living going up, and low-paid workers will

still have difficulty buying their basic needs. Their purchasing power will remain the same.

The article “Study: Raising Wages To $15 An Hour For Limited-service Restaurant

Employees Would Raise 4.3 Percent”, by Greg McClure, a spokesman from Purdue

University, talks about raising the minimum wage will increase the food cost in fast food

restaurants. McClure mentioned that fast food restaurants will increase 4.3% of the price if

raising the minimum wage to $15 an hour, or a reduction of the hamburger size by 12%.

(McClure). Raising the minimum wage will force businesses to increase the price of

consumer goods and increase inflation. Rather than helping low-wage workers, increased

prices will keep the burden of providing for their families the same.

Instead of raising the minimum wage, economists suggest there are three ways to solve

the problems of poverty. First, there should be an increase of earned income tax credits

(EITC). EITC is a benefit from the government; it provides low-wage workers taxes back.

Only low-paid workers are eligible to apply for it; it also relieves their worry about their

financial situation. The more children they have, the more money they will get back. It is

designed to reduce poverty and help the low-paid workers and their families. This program

has been successful in providing families with the means to get out of poverty. According to
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“Earned Income Tax Credits” from the CDC, “In 2017, EITC helped lift about 5.7 million

people, including about 3 million children out of poverty...” EITC programs also benefit

businesses and create job opportunities. When low-wage workers receive the money from

EITC, they spend money on their needs which leads to stimulating the economy. The CDC

further states, “A 2007 analysis of the economic impact of a federal EITC in California found

that EITC payments contributed to more than $5 billion in business sales in the state and

helped add nearly 30,000 jobs.” This is a means of putting more money into people’s pockets

and the economy by raising the minimum wage.

A second solution is to expand wage subsidies. The program incentivizes employers to

hire low-skilled workers by paying subsidies. It creates job opportunities for low-skilled

workers, supports them to learn new skills and accumulate their working experience during

work. Through the program, businesses will have more flexible finances to hire and train new

employees. Low-skilled workers will gain new skills, making it easier for them to find a

better paying job. Employers receive government funds and a temporary workforce, thus

everyone benefits.

Third, the federal government should offer more training programs. Low-skilled workers

can find good work if they are trained. However, they may have difficulty paying for their

basic needs, let alone pay for training programs. If the federal government can expand the

training programs for more low-skilled workers to participate in the workplace training in
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their local community, many low-skilled workers will benefit from it. Once they are skilled,

they will have more opportunities to work in higher paying positions. It will help get them

and their families out of poverty.

Although raising the minimum wage seems a good idea, it will cause poverty. Most low-

wage workers will not benefit from it, instead, it will make them jobless. If the minimum

wage increases, businesses will tend to hire workers who have more experience and have

higher education. Low-skilled workers will be replaced. Increasing the minimum wage will

also harm small businesses and consumers. When businesses are not able to afford the higher

employee costs, they will pass the cost to the consumers, cut the labor cost, or close. It will

not solve the poverty problems. The alternative solution is to increase the benefits to both

low-paid workers and employers. The government should increase the budget for EITC

programs, so low-paid employees will receive tax money back. The government should also

increase the wage subsidies, so businesses will be more willing to train the low-skilled

workers. Offering training programs to low-skilled workers will help them find better jobs.

Increasing the minimum wage is temporary relief to low-paid workers, but it will not solve

the problem of poverty. A long-term solution is to increase the benefits to low-wage

employees and help low-skilled workers become skilled.

Works Cited

“Earned Income Tax Credits.” CDC, [Link]/policy/hst/hi5/taxcredits/[Link]. Accessed 26

July 2021.

Ghiselli, Richard. “Study: Raising wages to $15 an hour for limited-service restaurant employees

would raise prices 4.3 percent.” Purdue University, 27 July 2015,

[Link]/newsroom/releases/2015/Q3/study-raising-wages-to-15-an-hour-for-

[Link]. Accessed 26 July

2021.

Hammonds, Clare, et al. Stressed, Unsafe, and Insecure: Essential Workers Need A New, New Deal,

University of Massachusetts, 23 Sept. 2020, [Link]/employmentequity/stressed-

unsafe-and-insecure-essential-workers-need-new-new-deal. Accessed 10 July 2021.

Hijaz

, Ashraf. “Raise federal minimum wage to aid our economic recovery.” Montgomery Advertiser, 28

July 2020, [Link]/story/opinion/2020/07/28/raise-federal-

minimum-wage-aid-our-economic-recovery/5530010002/. Accessed 26 July 2021.

Reisman, George. Capitalism: A Treatise on Economics. Jameson Books, 1998, p. 432,

[Link]/CAPITALISM_Internet.pdf. Accessed 26 July 2021.

Roosevelt, Franklin D. “Franklin D. Roosevelt Speeches: May 24, 1937.” School of Public

Policy, [Link]/academics/research/faculty-research/new-deal/roosevelt-

speeches/[Link]. Accessed 26 July 2021.

Sklar, Holly. “Nothing golden about this 50-year anniversary.” Press Herald, 10 Nov. 2019,

[Link]/2018/06/13/nothing-golden-about-this-50-year-anniversary-2/.

Accessed 26 July 2021.

Skorup, Jarrett. “Six reasons to oppose a $15 federal minimum wage.” The Hill, 30 Jan. 2021,

[Link]/opinion/finance/535936-six-reasons-to-oppose-a-15-federal-minimum-wage.

Accessed 26 July 2021.

Sandholm, Drew. “$15 minimum wage means layoffs: White Castle exec.” CNBC, 4 Dec. 2013,

[Link]/2013/12/04/[Link].

Accessed 26 July 2021.