Have you ever worked a job for minimum wage? If you have, you probably think that the minimum wage is too low. While this is understandable, the minimum wage is actually set at a fair amount. In fact, raising the minimum wage would just cause more problems than it would solve. The current federal minimum wage of $7.25 has its place in the United States, but it should not be raised. The federal minimum wage should not be raised because doing this would increase unemployment rates, increase the price of consumer goods, and increase poverty in some areas.
First, if the federal minimum wage was increased in the United States, the unemployment rate would increase as well. Increasing wages would force companies to lay-off employees that they could no longer afford. Data gathered and analyzed by the Congressional Budget Office shows that over 500,000 jobs could potentially be lost if the minimum wage was increased from $7.25 to $10.10 (Minimum). When these big companies (some small businesses as well) look to the future, they would realize that they could no longer afford an employee that they must pay $10.10 an hour.
Large companies would likely turn to different forms of automation. This would be far cheaper in the long run when compared to paying out these increased wages. Yes, there is an initial cost for the machine, but you do not have to pay it to work on a daily basis. Other than electricity and occasional maintenance, there would be less cost and hassle associated with using a machine in the place of someone making these increased wages.This is evident when Krakovsky states that “ at some point bringing in new equipment becomes more cost-effective than using minimum-wage labor” (Krakovsky).
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Unemployment would also likely drastically increase among teenagers and young adults. Around 49% of the people actually making minimum wage are in this age group (Wilson). Because they do not have a family to support (in many cases), they would likely get laid-off before some older adults. The fact that these young adults are without a job would make competition for jobs much greater, and many people in this age group would likely have a hard time finding a job as well. Studies have shown time and time again that raising the minimum wage would be detrimental to the employment rate across the country.
For example, in “The $10.10 Minimum Wage Proposal: An Evaluation Across States,” the authors conclude that “Using labor demand elasticities from previous empirical work, these coverage rates imply national employment losses between 550,000 and 1.5 million workers” (Hanson and Hawley). While this increase in unemployment would definitely hurt a large section of the country, an increase in the price of consumer goods would negatively affect every person in the nation.
Second, an increase in the federal minimum wage would not only increase unemployment, it would also drastically increase the price of consumer goods. If businesses were forced to pay their workers more, they would have to increase the prices of their goods/services to maintain a profit. If they did not increase their prices, they would likely lose money and eventually have to close their doors. Many small businesses would likely be shut down due to this. Also, when businesses end up increasing the prices of their goods, this increase would likely offset anything people making minimum wage gained. The people making minimum wage would end up paying more for essential things such as food, and this increase in the price of consumer goods would make their wage increase essentially useless.
In “The Detrimental Side Effects of Minimum Wage Laws,” the author states that, “If the cost of consumer goods goes up to compensate for the money lost paying employees whenever the minimum wage is raised, it creates a counter effect. As the price of goods has risen, the cost of living will increase, and another raise in the minimum wage would be necessary” (Hovenga 470). This just proves that increasing the minimum wage would be a useless cycle that would help nobody in the end.
When you take into account that the price of consumer goods for everyone increases (due to a minimum wage increase), it is realized that you are essentially cutting the salaries of those people that work above the minimum wage (the majority of the country). Only an estimated seventeen to eighteen percent of people nationally are actually going to “benefit” from this wage increase (Hanson and Hawley). The other eighty-two to eighty-three percent are going to get no wage increase whatsoever, but they will be expected to deal with the increase in the price of consumer goods. This could end up leading to people who were not previously struggling to begin struggling, and it could even end up forcing some small businesses to close. The increased price of consumer goods due to a minimum wage increase would end up hurting the economy of the whole nation.
The final reason that the federal minimum wage should not be increased is because an increase could actually cause more poverty throughout the country. The people that are going to get fired from businesses having to shut down will likely be unable to find a job anywhere else. These jobless people, who were previously making minimum wage, are now making nothing. They are just going to slip further into poverty. Increasing the minimum wage would also cause some companies to lay off those that are making slightly more than the minimum wage to compensate for profit loss from the increased price of consumer goods.
These people being laid off would get drawn into poverty as well because they would likely be unable to find a job. Also, as Wilson explains, when the price of consumer goods increases, it could likely hurt impoverished families more than it helps them. “If a minimum wage is partly or fully passed through to consumers in the form of higher prices, it will hurt the poor because they disproportionately suffer from price inflation” (Wilson). A minimum wage increase would do nothing but further hurt the country as a whole.
Some people try to argue that increasing the minimum wage would not have adverse side effects and would lower poverty rates. These people think that the increase in unemployment and the increase in the price of consumer goods would be negligible or even non-existent. These people also argue that the current minimum wage has not kept up with inflation.
The problem with these statements is that there are just too many facts that are able to point out their flaws. In referencing the information found on ProCon.org again, one can see that the Congressional Budget Office thinks otherwise. They predict that over 500,000 jobs would be lost due to a minimum wage increase (Minimum). Five hundred thousand jobs does not seem like a negligible amount to me. You could argue that we do not actually know whether or not businesses will have to increase prices to stay open, but they would have to make up for the profits lost somehow.
Due to the increased wages of their workers, these businesses would either have to fire people or increase their prices. At this point it just seems like they are picking their poison. Finally, how can you argue that the minimum wage would reduce poverty when the Congressional Budget Office is stating that over 500,000 people could lose their jobs? If 500,000 people lose their jobs and cannot find another one, there are another 500,000 people that have slipped into poverty. Increasing the minimum wage would end up helping nobody, but hurting many.
In conclusion, increasing the federal minimum wage is not a good idea. An increase of the federal minimum wage in the United States is not the answer to eliminating poverty. This increase in the minimum wage would do nothing but hurt the country’s economy and people. As previously stated, an increase in the federally mandated minimum wage would drive up the price of consumer goods, increase unemployment, and increase poverty in some areas. Why does all of this matter? It matters because increasing the federal minimum wage will only further hurt the nation as a whole.
