Will increasing the federal minimum wage result in lower profits for businesses, lost jobs for employees, and an overall negative impact on the American economy? Will keeping the minimum wage at its current level continue to shrink the middle class, increase the income gap between the super-rich and the rest of us, and leave us with a stagnating economy unable to significantly grow? Before we delve into these questions, it’s imperative to point out the facts as of January 2017.
Employers must pay workers the highest minimum wage set forth by the federal government, their state government, or local law. The federal minimum wage currently is $7.25 per hour, and has been since July 2009. There are 29 states that have higher minimum wages than the federal rate. The states of Massachusetts and Washington are tied with the highest minimum wage at $11 per hour. There are 14 states that have the same minimum wage as the federal government, 2 states that have a minimum wage less than the federal government, and finally 5 states that do not have a minimum wage in place.
On the local level, many cities nationwide are setting minimum wages higher than that of their states and of the federal government. For example, San Francisco is projected to be the first city to reach the $15 per hour minimum wage mark on July 1, 2018, New York City’s minimum wage will be $15 per hour by the end of 2018, and both Los Angeles and Washington, D.C. will reach $15 per hour by 2020. Using real terms by incorporating 2014 inflation-adjusted dollars, the federal minimum wage peaked near $10 in 1968.
There are obviously two camps with opposing views on the federal minimum wage: those who think it needs to be increased, and those who believe it does not need to be raised. However, even in the “raise the minimum wage camp”, there remains questions and conflicting views: just how much does it need to be hiked up to? $10? $12? $15, or even more? That’s where economic studies, research, and other forms of evidence becomes relevant and invaluably helpful. Especially considering that at some point, inevitably after nearly 8 years and counting, the federal minimum wage will be increased. So, it begs the question, increased to what amount?
Unfortunately, a lot of the research on the federal minimum wage is limited to rate hikes of $3 or $5, to $10 or $12 per hour nationally, and not double the current rate, to $15 per hour, which many protesters and even some politicians are advocating. An escalation that large certainly increases the level of uncertainty for politicians, businesses, employees, and consumers. In 2014, the Congressional Budget Office estimated that a rise of the minimum wage to $9 would produce a loss of 100,000 jobs, but a climb to $10.10 would mean five times more jobs (500,000). In regards to a minimum wage hike to $15 per hour, Gary Burtless, an economist with the Brookings Institute, said the potential adverse effects are “likely to be considerably bigger”. An important distinction to also consider is the fact that, per PolitiFact, “the negative impacts could be especially big in lower-cost rural areas…$15 is one thing for bigger cities where the cost of living is more expensive; these are the places where the movement has flourished in recent years.”
Still, there are economists that support the $15 minimum wage if it’s gradually phased in over a certain number of years. Economists Andrew Zimbalist of Smith College and Steven Fazzari of Washington University stated they would still support a $15 per hour minimum wage. Fazzari explains that not raising the minimum wage extensively could leave many workers “without the ability to afford a decent life, despite working hard at a full-time job…this situation also fuels the kind of social frustration and unrest that we have seen…” Fazzari also purported that the risk of job losses would be less severe if implemented nationally rather than locally: “a national policy limits the ability of employers to relocate to dodge the requirement. A national policy levels the playing field.”
A lot has changed recently in the American political and economic landscape. Yet the great minimum wage debate that has lasted numerous years, affecting millions across the nation, endures. Whether the federal minimum wage increases by a few dollars, or virtually doubles to $15 per hour, basic economics would argue that at some point after nearly eight years, the rate will need to rise. Clearly, we’ve seen more and more states take matters into their own hands by upping the rate incrementally, or through their own inaction akin to the federal government. As years go on and inflation naturally takes its course, undoubtedly tensions will only intensity to greater heights. We’ve already seen massive protests around the country within the first couple months of the year, and those kinds of demonstrations will continue until real change is achieved at the federal level. Political inactivity will only add more gas to a fire that has been engulfing America into flames. The country is deeply divided now by countless political, economic, and social issues, whether originating domestically or tied to foreign affairs. However, the minimum wage dispute is truly one conflict that is able to sum up a struggle that many Americans face daily: the continuous battle between the ‘haves’ and ‘have nots’.