Minimum Wage: The Real Issues

Over the recent months, the campaign for raising the minimum wage has gained a fair amount of traction. Assorted remedies have been proposed, with the most common values raging anywhere from $12 to $15.

Before discussing what the right choice is, it’s important to know the history behind the minimum wage. Since 1938, the federal minimum wage has increased twenty-two times. The last increase was on July 24, 2009, which was the last increase of a three-step increase approved by Congress in 2007. Before this, the federal minimum wage had been $5.15 for the previous decade. As far as employers go, currently the food service industry is the largest employer of minimum-wage workers.

Currently there are twenty-nine states, the District of Columbia, and a variety of other cities that have set higher minimum wages than federally mandated. As of July 2015, the state with the highest minimum wage is Washington State at $9.47 an hour.

Many believe that an overall increase in the minimum wage will finally give consumers and employees the wages they need to keep up with the cost of living, as well as living a more comfortable lifestyle overall. Many believe that, while businesses would be able to hire fewer employees, the quality of life and productivity of the employees they do have will be improved enough to justify the negatives. Some even argue that an increase in minimum wage will help companies boost profits because they will be able to retain workers more easily.

However, critics of this method argue that increasing minimum wage will ultimately lead to an increased financial strain on employers and producers. These issues could potentially result in a higher unemployment rate or an increase in product cost. Increasing the minimum wage followed by increasing the cost of goods and services would in turn leave everyone in the same position as beforehand, but now with a higher dollar value. The only motivation for American companies to keep their prices low would be the threat of cheaper foreign competition, which then leads back to an increase in layoffs to cover production costs.

Previously, economists believed that increasing the minimum wage would be bad for the economy. Some economists have now reported that there is no evidence supporting an increase in wages costing jobs. On the other hand, a study released from the University of California, San Diego reviewed data from the 2007 minimum wage increase reduced the national employment-to-population ratio by .7 percentage points, as well as a 6 percentage point decrease in the likelihood of low-wage workers to have a job. This would then make it more difficult for these employees to transition to higher-wage employment opportunities. Increasing the minimum wage has the ability to help many people and hurt many others.

C/O Pew Research Center. Source:
C/O Pew Research Center. Source:

With the threat of increased foreign competition as well as the value of the dollar on American soil, it is then important to consider the impact of inflation, if any. The latest inflation rate as published by the US government on July 17, 2015, is .01% through the 12 months ending in June 2015. When adjusted for inflation, the minimum wage peaked back in 1968. Additionally, according to Pew Research Center, the minimum wage has lost around 8.1% of its purchasing power to inflation. The more we continue to print bills, the more we self-destruct the value of our own currency. While certainly not the only cause of the gap between the cost of living and the minimum wage, few politicians or pieces of legislation address the impact of continually printing more currency as well as inflation.

While there is no clear solution to this issue, it is becoming increasingly clear that something has to be done. The average cost of living in the U.S. for a two-parent, three-child household is $58,672 annually. For families with a parent employed at minimum wage, if they work forty hours a week, every week without missing any time at all, they will make about $15,080 per year. If both parents work minimum wage jobs, this leaves the family making $30,160 per year, which is substantially below the average cost of living. An increase in the federal minimum wage may not be the best solution, but it’s imperative a solution is found soon.

Cover Photo by A.P. Source: 


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