The city of Seattle has mandated a $15 per hour minimum wage be implemented in the coming years. President Obama declared a raise in the federal minimum wage to $10.10 per hour for contract workers, even though the actual minimum wage has stayed put at $7.25 per hour. Increasing the minimum wage has some definite pros and cons to consider, so here are a select few to think about today.
What Are the Pros of Increasing the Minimum Wage?
1. It establishes a livable income for those who are earning it.
Many minimum wage jobs are entry-level positions that are designed for temporary workers. With job growth stagnation, industry changes requiring different skill sets, and long-term unemployment an issue for many households, these temporary jobs are often more full-time than intended. Without a livable income, it is impossible to provide for a family.
2. It requires a business to focus on budgeting.
Most businesses focus on profits. Sometimes this is because shareholders demand it, but at other times it is simply to enhance the long-term viability of that business. What often gets overlooked in this process is that a business needs skilled workers to create long-term viability. By having a higher minimum wage, it requires businesses to budget for this need and this helps workers get a better share of the profits they’re earning for their company.
3. It creates a larger pool of economic resources.
Local dollars that stay local have nearly double the value of money that gets spent outside the community. If the minimum wage went up from $7.25 to $10.25, that’s potentially $6 per hour of economic benefits per worker that could be achieved. That means everyone gets to benefit from the extra cash and communities can work on creating a firm financial foundation to build upon for the future.
4. It lessens dependence on public assistance programs.
Companies like McDonald’s have come under fire because of their advice to have employees apply for food aid and other government assistance benefits because of their low wages. Higher minimum wages would potentially lessen the dependency requirements that low income workers currently have on these taxpayer funded programs.
What Are the Cons of Increasing the Minimum Wage?
1. It may limit job opportunities for the local community.
If a business has a pool of $30 per hour to spend, then they’ll be able to hire 4 workers at the lower minimum wage. If the minimum wage is increased to $10 per hour, then they’ll only be able to hire 3 workers. This means 3 households get to earn extra money, but the fourth household is suddenly hitting the unemployment line because they don’t have a job any longer.
2. Innovation emphasizes eliminating the lower level worker.
Automation has entered a number of industries and a higher minimum wage could further enhance this point of emphasis. Consider automated ordering at the front counter of a quick service restaurant. The customer can enter their own order, pay with the swipe of a card or with Apple Pay, and have their food delivered without the need of a cashier. This ultimately means fewer jobs as well.
3. Prices may rise in certain industries.
Although the pricing gains aren’t generally going to be very large, they could be between 2-5% in many industries. For lower priced items like a pizza, that means a $10 pizza today would be $10.50 with a higher minimum wage. It’s the big ticket items where the costs really increase. A $650 iPhone would suddenly become $687.50. Small price increases most folks don’t mind paying. Those large increases, however, can become problematic for household budgets.
4. There is less motivation to better oneself.
If someone can earn a high minimum wage without earning an expensive degree, then there is less motivation to try to increase personal-level talents and skills. Other wages would have to increase in other industries at all skill levels to encourage growth and this would start a cycle of inflation which would ultimately make the minimum wage increase pointless.
Increasing the Minimum Wage Must be Carefully Balanced in Order to Achieve Positive Gains.
There might be some growing pains and some added costs that happen because of these increases, but households might also have a better chance to get out of poverty as well. By evaluating all of these pros and cons of this subject, a consensus can be formed so that the right course of action can be taken.