Is a Minimum Wage Good or Bad?

Is a Minimum Wage Good or Bad? The minimum wage has been a big news item in recent months. Congress – with the encouragement of a new administration in the White House – is considering making substantial change.

Many lawmakers believe it is well past time to give the lowest-paid workers a raise. After all, the minimum wage has been just $7.25 per hour since 2009. 

However, there is a vocal group of opponents with a persuasive counterargument: increasing this figure will put companies out of business – especially small businesses that don’t have a lot of flexibility in their budgets. That, of course, would cost jobs. 

A movement known as “Fight for $15” has been hard at work on boosting the minimum wage to $15 per hour for every worker in the country. They have seen some success, as a handful of companies have voluntarily updated compensation plans.

Some cities and states have passed legislation to increase pay requirements, as well. However, a federal regulation remains elusive. 

There is an on-going debate on whether a higher minimum wage is good or bad. Who will it help? Who will it hurt? And ultimately, would increasing the federal minimum wage deliver a basic standard of living for the nation’s low-income workers, or will it leave them out of a job? 

Positive Effects of Raising Minimum Wage

Proponents of a higher minimum wage have a simple philosophy: no one who works 40 hours per week should live in poverty. However, the current minimum wage of $7.25 per hour isn’t enough to cover housing expenses in any part of the country, much less other essential costs of living.

According to a group of economists, if the federal minimum wage increases to $15 per hour by 2025, 21 percent of the United States workforce – 32 million workers – would benefit.

These employees would see roughly $3,300 more in their paychecks each year, which would dramatically change their circumstances.

The poorest-paid positions – cashiers, fast food workers, home health aides, and similar – currently earn about $15,000 per year before taxes if they work 40 hours per week.

Why Raising Minimum Wage Is Good

Improving the circumstances of the country’s most impoverished workers is a critical goal for supporters of a $15 minimum wage, but it is not the only goal.

Many point out that the employees earning $7.25 per hour tend to be historically disadvantaged members of society – for example, women and people of color. 

In other words, there is a misconception that those who earn the minimum wage are teenagers with part-time jobs or individuals who have not gone to college. That couldn’t be farther from the truth. In fact, only 10 percent of minimum wage workers are teenagers. 

The population who would actually see benefits include the following: 

• Adults aged 25 to 54 (51 percent) 
• Women (59 percent) 
• Employed full-time (54 percent) 
• Some college (43 percent) 
• Parents supporting children (28 percent) 
• African Americans (31 percent) 
• Latinos (26 percent) 
• African American or Latina women (23 percent) 

Research shows that African American and Latino workers are paid between 10 and 15 percent less than similarly situated white workers.

The gender wage gap is even larger. Women of all races make an average of $0.82 for every $1 earned by men of all races. That drops to $0.62 for African American women and $0.54 for Latina women. 

In other words, there is a very real argument that raising the minimum wage is a must if there is any hope of reducing the systemic racism and sexism that has been dividing the country for generations. 

Negative Effects of Raising Minimum Wage

The biggest argument against raising the minimum wage is the potential impact on employers. To begin with, there are more than 33.2 million small businesses in the United States. Roughly 99 percent of all companies qualify under the small businesses heading, and an estimated 47.5 percent of the American workforce works for this type of employer. 

Since many small businesses already operate on a tight budget, they may find themselves in a position where they must lay off workers to stay afloat if the minimum wage increases. Those that can’t function with a smaller workforce will have to close their doors.

Economic analysts estimate that an increase in the minimum wage may eliminate as many as 1.3 million jobs, which would primarily impact the low-paid workers the minimum wage is designed to help. 

Opponents of a change to minimum wage guidelines also suggest that it is inappropriate for Congress to dictate wage requirements for private companies.

After all, any mandatory minimum wage requirements do not come with government subsidies. Companies are required to cover the additional payroll cost themselves. 

Why The Minimum Wage Should Not Be Raised

In addition to these concerns, those against an increased minimum wage suggest that there would be a negative impact to the larger economy. They say the minimum wage should not be raised because it encourages the outsourcing of jobs to other countries.

It’s no secret that many large companies rely on workers in India, China, Malaysia, Thailand, and Brazil for a wide variety of skilled and unskilled tasks. 

It is also noted that a rise in the minimum wage could prompt inflation – and that includes inflation in the cost of housing, which is already unsustainably high in every state.

It stands to reason that when workers earn more, they spend more – and more spending disrupts the delicate balance of supply and demand, leading to higher prices on everyday goods and services.

Is a Minimum Wage Good or Bad? The Bottom Line 

The bottom line is that there are no easy answers to the question of whether a minimum wage is good or bad. Certainly, no one wants to create hardship for small businesses or eliminate jobs from the economy. 

However, there is growing consensus that the pros outweigh the cons when it comes to increasing the minimum wage, as it simply doesn’t make sense to pay so little that people must rely on government safety nets for their very survival.

If jobs are lost, funds that were once needed to support workers below the poverty line can be used for retraining and skilling up those who find themselves unemployed. 

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