​A Minimum Wage that Works

Written by Ryan H.
Edited by: Andri M.,
​and Conor M.

From Volume 1 Issues 2 on Poverty in America
​

                As of 2018, there were 38.1 million United States citizens living in poverty, according to the US Census (US Census Bureau). The Living Wage Calculator, an MIT website and information source, defined the poverty threshold in 2017 as $24,793 a year for a family of four (Glasmeier and Nadeau). In many cases the low income of impoverished families leads to a cycle of many generations living in poverty. To break the systemic cycle, the country needs a solution that will elevate a large amount of citizens out of poverty without the current government subsidies given to the poor. A contrasting solution to providing subsidies to the poor, is to create laws to aid those below the poverty threshold so they can help themselves. Based off numbers provided by the Living Wage Calculator, one specific solution could solve most of this problem by raising the national minimum wage to a living wage (Glasmeier and Nadeau). Currently, the federal minimum wage has not been raised since 2009. The issue of the national minimum wage has been argued over for decades. When some people discuss the issue of a living wage, they bring up many different aspects affected by resolving poverty such as the economy, small businesses, morals, and politics, which make this a very complex problem. People and political parties have argued over whether moving to a living wage is morally right or wrong for the nation and fiscally good or bad for the economy.  To successfully raise the minimum wage to a living wage with positive effects on the nation, the challenges of the implementation need to be evaluated, the process of how the raise will work needs to be discussed and the limitations of the impact of the raise need to be determined.

                Most of the states that have not yet shown interest or support in the bill believe the implementation of the bill would be too great a challenge or would present economic hardships for their states. Data from the National Conference of State Legislatures (NCSL) on the 2019 state minimum wages shows that the states that have not adopted the increased minimum wage are mostly southern states and states with low populations (National Conference of State Legislatures). These states may not believe in the raised minimum wage because of their current economic challenges. It can be hard for them to believe that a more costly minimum wage would benefit their state by providing more money for the residents to spend and more opportunity for these residents to pay additional taxes. Another argument against raising the minimum wage is the potential ill affect it may have on small businesses. Adam Uzialko, an experienced business journalist, cites the Fiscal Policy Institute which found that over a three year period, “... small business activity... grew at a rate of 3.1% in states with higher minimum wages, compared with a rate of 1.6% in states with lower minimum wages. Employment grew 1.5% more quickly in states with higher minimum wages. Annual payroll and average payroll per worker increased more quickly in states with higher minimum wages” (Uzialko). People and states have misconceptions that the raise of the minimum wage will have negative affects on small businesses, but as seen in this research that is not the case. Additionally, many small business owners find that offering higher wages gives them an advantage in hiring better employees. Adam Uzialko acknowledges that, “many business owners... understand they have to remain competitive if they want to keep their best workers and continue bringing in the candidates with the most potential” (Uzialko).  The increased minimum wage will actually grow businesses and employment in the nation.

     But before implementing an increase, people must discuss the challenges and clarify potential obstacles. There must be discussion and agreement on how moving from a $7.25 to a $15 federal minimum wage will work. As proposed by the Democrats, a smart way to implement the new minimum wage would be to gradually increase the wage from $7.25 to $15 over time. Based on proposed legislation the Economic Policy Institute, an organization which provides economic information to the public, states, “the Raise the Wage Act of 2019 would gradually raise the federal minimum wage to $15 an hour by 2024” (Economic Policy Institute). This gradual raise would keep the economy stable while the minimum wage is being raised, helping businesses as well as families in poverty. Once the initial living wage of $15 per hour is met, the wage will need to be maintained overtime to keep low income families from returning to poverty due to rising expenses.  This will be done by adjusting the minimum wage every few years to keep pace with inflation. As stated by the Economic Policy Institute, “after 2024, the US must adjust the minimum wage each year to keep pace with growth in the typical worker’s wages” (Economic Policy Institute).  The act of increasing the minimum wage to track with inflation is to prevent a recurrence of the current situation of the minimum wage not being increased for over a decade. The final piece needed to enact a raised minimum wage is for the U.S. Senate to pass the bill that has already gone through the House of Representatives. Some states have seen the need for the change and have passed laws to raise minimum wage ahead of the federal government. According to Representative Robert C. Scott’s Fact Sheet, “red and blue states have recently passed minimum wage increases. Since 2014, 16 states have raised their minimum wage, including red states like Alaska, Arkansas, Nebraska, South Dakota, and West Virginia” (Scott). The fact that both parties support a raised minimum wage exhibits how much of a need there is for this increase.

                Although both parties agree the need for the increase exists, there are a number of obstacles which may limit the impact of raising the minimum wage. For instance, some fear that a minimum wage increase to only $15 will limit the growth of businesses and increase employment for the impoverished because of inflation. Representative Robert C. Scott argues that  “a raise in the minimum wage predominantly benefits low-wage workers, precisely those most likely to put additional income directly back into the economy, kick starting a virtuous cycle of greater demand for goods and services, job growth, and increased productivity” (Scott). If the $15 minimum wage is not gradually increased to keep up with inflation, it will leave people behind, having the same effects as the current outdated federal minimum wage. Workers may also experience a diminishing return on their income if there is no wage alignment with the current cost of living, but their productivity increases. The Economic Policy Institute emphasizes that, “the economy has grown dramatically over the past 50 years, and workers are producing more from each hour of work, with productivity nearly doubling since the late 1960s” (Economic Policy Institute). Given these findings, it is clear that minimum wage workers deserve a raise due to their increased productivity. Furthermore, adjustments should periodically be made to reflect increased effort and cost of living increases. Finally, some are convinced raising the minimum wage will lead certain companies, particularly in manufacturing, to automate low level jobs. Yet, there will be new jobs created by automation that will make up for jobs lost to it. Senior entrepreneurship writer at CNBC, Catherine Clifford suggests, “... that employment prospects for some workers in higher-wage occupations are boosted by minimum wage increases, consistent with a story in which some jobs are lost to automation, while others are created” (Clifford). Although some workers may lose their jobs to automation, more jobs will be created. Thus, the net gain will still have a positive impact on the economy and employment overall.

                A better economy and employment rate will help provide opportunities to those below the poverty line. The $15 minimum wage should give the poor opportunities to pull themselves out of poverty and a chance to make a better life for themselves and their families. Taking the approach of a gradual increase, will leave time to work through the challenges of implementing the raised wage. This will allow small businesses and states to find their new equilibrium as the wage moves from one level to the next. The hurdles of inflation and businesses turning to automation will also create a new normal as the economy and industries evolve. In order to put the $15 minimum wage into effect people should support senators, organizations, petitions and protests that promote the increase of the federal minimum wage. Providing those below the poverty threshold with a living wage gives them a hand up instead of a handout.
 
Sources:
Clifford, Catherine. “Here’s new evidence minimum-wage hikes result in workers being replaced by robots.” CNBC, 17 Aug. 2017, https://www.cnbc.com/2017/08/16/evidence-minimum-wage-hikes-result-in-workers-being-replaced-by-robots.html. Accessed 30 Oct. 2019.

Economic Policy Institute. “Why America Needs a $15 Minimum Wage.” Economic Policy Institute, 5 Feb. 2019.
https://www.epi.org/publication/why-america-needs-a-15-minimum-wage/. Accessed 17 Oct. 2019.

Glasmeier, Amy K. and Nadeau, Carey Anne.“Bare Facts About the Living Wage of America 2017-2018” Living Wage Calculator, Aug. 2018, https://livingwage.mit.edu/ articles/31-bare-facts-about-the-living-wage-in-america.

National Confrence of State Legislature. “State Minimum Wages | 2019 Minimum Wage by State.” National Confrence of State Legislature, 7 Jan. 2019, http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx. Accessed 30 Oct. 2019.

Scott, Robert C. “Raising the Minimum Wage: Good for Workers, Businesses, and the
Economy.” Committee on Education and the Workforce Democrats, House of Representatives, United States. https://edlabor.house.gov/imo/media/doc/ FactSheet-RaisingTheMinimumWageIsGoodForWorkers,Businesses,andTheEconomy-FINAL.pdf. Accessed 17 Oct. 2019.

US Census Bureau. “Income, Poverty and Health Insurance Coverage in the U.S.: 2018.” The United States Census Bureau, 24 Sept. 2019, https://www.census.gov/press- releases/2019/income-poverty.html.
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Uzialko, Adam C. “How Small Businesses Are Affected by Minimum Wage.” Buisness News Daily, 11 Sept. 2019, https://www.businessnewsdaily.com/8984-increased-minimum-wage.html. Accessed 30 Oct. 2019.