The Effects of Increasing the Minimum Wage

    What’s the point of the minimum wage? Will increasing the minimum wage help or harm the United States economy? Those questions are very significant to people's quality of life and to the economy. Increasing the minimum wage will increase the average price that consumers will have to pay, increase the rate at which the youth will be unemployed which will stop them from obtaining job experience and greatly affect low-skill workers by causing them to be unemployed, decrease their overall earnings and lose their jobs to automation.

    The legality of the minimum wage was heavily debated among the U.S. President, the U.S. Congress and the U.S. Supreme Court. President Franklin Delano Roosevelt strongly believed that every worker should have enough money to have an acceptable standard of living. President Roosevelt asked Congress to put into law a federally mandated minimum wage. However, Congress did not put Roosevelt’s proposal into law. Opponents believed that a federal minimum wage violated a foundational doctrine that was between the employees and employers. The doctrine stated that the employees and employers should be free to set their own salary with each other without outside intervention. The U.S. Supreme court first ruled that the federal minimum wage was unconstitutional. However, the U.S. Supreme court changed their decision after dealing with the heat of public pressure and President Roosevelt’s threat to the Supreme Court to pick justices who support the federal minimum wage. Finally, the Supreme Court changed its ruling about the federal minimum wage and it was put into the law as part of thelifeforcrypto 2 Federal Labor Standards Act (FLSA). Every election cycle, Congress has a debate about increasing the federal minimum wage. There are two main camps on this issue. The opponent of increasing the federal minimum wage will argue that raising the minimum wage will do little to help low-wage workers. The other side will argue that low-income workers should have a better life and raising the federal minimum wage will do that (Ronald 613-616).

    One effect of increasing the minimum wage is that the average price will increase for the consumers. There was a study that examined 884 online restaurant menus before and after the 25 percent minimum wage increment from 2013. This study investigated the consequences the minimum wage had inside and 1.5 miles away from both borders of San Jose, California. The study concluded that the restaurants that were affected by the minimum wage increase reacted by increasing their prices a mean of 1.45 percent. However, the study found that increasing the minimum wage did not cause a significant decrease in employment or economically helped nearby areas (Allegretto and Reich 35 - 36). If the average price of goods increase then the consumers will have to pay more for that good.

    One group that is affected by an increase in the minimum wage is the youth. A study looked at how an increase in the minimum wage would affect youth employment. This study defines the youth as ages starting at 16 and ending at 24 years of age. The study's result showed that a 10 percent increase in the minimum wage will have a 3.2 decrease in youth employment (Kalenkoski and Lacombe 303-304). This study proves that the youth will be more likely to be unemployed due to the increase in the minimum wage which will stop the youth from getting job experience because you can’t obtain job experience without a job.

    Another group that is greatly affected by increasing the minimum wage is low-wage workers mainly due to being unemployed at larger numbers and their overall earnings decreasing. There was a study that investigated the connection between increasing the minimum wage and how that would affect low-skilled workers employment and their overall earnings. This study’s data used the years of 2007 to 2009. The study compared states that raised the minimum wage to those that did not. The results show that an increase in the minimum wage slowed down employment rates by about half of a percentage point compared to those that had a lower minimum wage. Another effect of Increasing the minimum wage is that it increased the likelihood that low-skilled workers would work without pay by 2 to 12 percent. Also, the low-skilled workers that lived in states with an increase in the minimum wage had their average salary go down by 100 dollars over the rest of the year and an another 50 dollars over the next two years (Clemens and Wither 53-54).

    There was another study that also investigated whether raising the minimum wage or keeping the minimum wage at its current wage would help or harm low-wage workers. The study used data from the Using Current Population Survey data between the years of 2005 to 2008. The study found that the low-wage workers who received a small increase in the minimum wage had a negative effect on their overall earnings. The most surprising founding of the study was low-wage workers overall earnings were worse compared to the low-wage workers who did not have a minimum wage increase. This is also true for slightly higher workers overall earnings when there is a large minimum wage increase. The authors of the study concluded that the only thing that determined the worker's earnings were how much the minimum wage would increase and the personal choices of the individual(Lopresti and Mumford 171 - 173). For the reasons stated above the two studies prove that increasing the minimum wage affects low-skilled labor the most because low-skilled labor will have a higher unemployment rate and will have lower earnings over the long-term.

    Automation dispositionally affects low-skilled workers the most. A study looked at the effects of raising the minimum wage and the employment of low-skilled workers. The study used data from the Current Population Survey which was between the years of 1980 to 2015. The findings were raising the minimum wage made it more likely that low-skilled workers would lose their jobs to automation or become employed in inferior jobs. Older workers who worked in manufacturing are the most affected low skilled worker. However, there are is an increase in employment for those who are higher-skilled workers. The authors of the study hypestize that increasing the minimum wage will make the price of labor more expensive which will make low-skilled labor seem less attractive and increase automation (Lordan and Neumark 40 - 42).

    In conclusion, increasing the minimum wage has the biggest impact on the youth and low-skilled workers. The youth won’t be able to gain job experience due to having to compete against people who are older with more job experience. Low-skilled workers have to face being unemployed, having their overall earnings decrease and lose their jobs to machines. In addition, to those struggles the average price of goods will also increase. Employers have to make economical rational decision to stay in business. Likewise, the youth and low-skilled workers will not make economic decisions that will leave them worse off. For the reasons stated above, increasing the minimum wage economically harms a large group of people which means their quality of life is not what it could be.

    Allegretto, Sylvia, and Michael Reich. "Are Local Minimum Wages Absorbed by Price Increases? Estimates from Internet-Based Restaurant Menus." ​ ILR Review , ​ vol. 71, no. 1, Jan. 2018, pp. 35-63, ​ Business Source Alumni Edition . ​ doi:10.1177/0019793917713735.

    Clemens, Jeffrey, and Michael Wither. "The minimum wage and the Great Recession: Evidence of effects on the employment and income trajectories of low-skilled workers." ​ Journal of Public Economics , ​ vol. 170, Feb. 2019, pp. 53-67, ScienceDirect . ​ doi:10.1016/j.jpubeco.2019.01.004.

    Kalenkoski, Charlene, and Donald Lacombe. "Effects of Minimum Wages on Youth Employment: the Importance of Accounting for Spatial Correlation." ​ Journal of Labor Research, ​ vol. 29, no. 4, Sept.-Oct. 2008, pp. 303-317, ​ Business Source Alumni Edition. doi:10.1007/s12122-007-9038-6.

    Lopresti, John W., and Kevin J. Mumford. "Who Benefits from a Minimum Wage Increase?" ​ ILR Review , vol. 69, no. 5, Oct. 2016, pp. 1171-1190, ​ Business Source Alumni Edition ​. doi:10.1177/0019793916653595.

    Lordan, Grace, and David Neumark. "People versus machines: The impact of minimum wages on automatable jobs." ​ Labour Economics​ , vol. 52, no. 40, June 2018, pp. 40-53, ​ ScienceDirect​. doi:10.1016/j.labeco.2018.03.006.

    Ronald, Adams. "Standard of Living as a Right, Not a Privilege: Is It Time to Change the Dialogue from Minimum Wage to Living Wage?" Business and Society Review, ​ vol. 122, no. 4, Dec. 2017, pp. 613-639, ​ Business Source Alumni Edition . doi:10.1111/basr.12133