Why is minimum wage in place? Employees receive a baseline pay in order to maintain structure within their income as well as within the work place. Although, what would happen if minimum wage were to rise? Would prices raise? Would poverty rates drop? Many individuals believe minimum wage is too low and causes adults the inability to afford for the basic living expenses but what if minimum wage were to rise? Minimum wage should not be raised just because adults need more money to help pay with finances and to lower poverty rates. The baseline of pay should be maintained because business owners would be affected by the increase, the consumers would be affected by the increase and finally current and future employees would pay for some of the consequences for the increase.
Each individual state, country and continent has its own set minimum wage. This will vary based on the living expenses within the designated area. Seattle has a minimum wage that has grown over the years. The minimum wage is almost $20 due to the living costs within the city. According to Laura Smith, “a living wage represents the minimum rate that would allow workers to afford basic resources such as food, shelter, and transportation for their families.” Many individuals use these minimum wage jobs to gain experience and climb their way up on the income ladder. Although, in some cases, many adults, even those with children use these minimum wage jobs as their foundation.
Business owners would be greatly affected if minimum wage were to rise. Owners of small business are forced to adjust their prices of items and adjust their budget for their inventory if minimum wage were to increase. “If a restaurant owner in California has to boost the dishwasher's pay to $8, he'll probably have to raise the cook's higher salary as well. The owner then has to absorb the added costs and make less of a profit or raise prices which, in a shaky economy, could scare off customers.”(Smith) Would losing customers be worth the wage increase for the employees ? Business owners rely on the customers to bring in a steady profit and contribute to the budget for workers and new inventory and without the customers coming into their businesses, employees could be laid off and hours could be decreased in order to continue being a stable small business. Owners focus on maintaining the growth of their business, and if that mean not having a large staff, they will take those measures. An article from Junior Scholastic included an idea from a state representative of Illinois. “This vote will absolutely eliminate thousands of jobs across the state," said State Representative Dave Winters. "Employers do not have to pay $7.50. They can simply not hire a person."
Minimum wage should not be raised because the employees and future employees would suffer by this increase. Jobs that pay minimum wage include fast food places and some retails stores. These jobs require little to no experience and are entry level jobs. That is why the income isn’t as “high” as other jobs. “That is, if the minimum wage is $17 an hour, but a person’s work is only worth $16 an hour, they will simply be unable to get a job.” (Lesh). Adults and teenagers seeking for employment may be unable to receive a job because they are seen as “unworthy” of the work because they don’t have the prior experience in that field of work. Ultimately, would the people trying to stay away from the hardships of poverty be able to receive a job without experience? The cost to pay for workers who don’t “deserve the work” can eliminate those jobs all together. In many countries and states, places of work are eliminating the number of workers and replacing them with "self-checkout" type machines. Many McDonalds within Europe have self-ordering stations to replace potential cashiers. This is because companies do not want to pay for the high labor costs of employing multiple workers for cash registers when they could eliminate the person together and just use a computer to produce their order. According to the States News Service “Between January and June, Seattle lost about 1,300 restaurant jobs.” Jobs are lost because of the wage increase and if it continues to grow, products will become more expensive and jobs will be lost.
In 2007, Congress voted to increase the minimum wage, raising it in three $0.70 increments from $5.15 to $7.25 an hour. The first increase took place in July 2007, the second in July 2008, and the final increase will take effect on July 24, 2009. This final installment represents a 10 percent increase in the cost of hiring minimum wage employees.
The economy seemed healthy at the time that Congress passed the increase. Unemployment was below 5 percent. Since then the economy has slipped into a deep recession and unemployment has doubled to nearly 10 percent. Unemployment among the least skilled workers has jumped by an even larger amount. Congress should reconsider this minimum wage increase in light of the recession. (The Minimum Wage)
Clearly, at the moment of the minimum wage increase, employers were benefitted but over time more jobs were lost and affected future employees and ultimately did not benefit employees.
Consumers will also be affected by the minimum wage because prices will most likely raise to compensate the wage increase. When prices increase, customers would be paying more for products that were cheaper in the past. For example, gas prices have went up and down due to oil prices. Everyone with a car still needs gas but if prices went up at a small business, most consumers would be less likely to purchase a product at a more expensive price more often and would be less likely to get it from a small business. Consumers with steady wages will have to spend more of their weekly or monthly earnings to support a business that had a price increase. Businesses are not the ones paying for the minimum wage raise “Customers pay for higher starting wages through higher prices.” (Sherk). Consumers who receive minimum wage will be placed in the same issue because they maybe receiving more money hourly, but they will be charged more for the items they regularly purchase.
“Minimum-wage-driven price increases raise prices disproportionately on goods and services purchased by the poor. Viewed as a consumption tax, the minimum wage charges the poor higher rates than the middle class or the rich. This makes minimum-wage increases’ price effects more regressive than sales taxes.” (Sherk).
Consumers will ultimately be losing money due to the hourly income raise.
Figure 1 : This is a chart that shows the poverty line for an individual as well as a family of three. It shows the needed yearly earnings to live above to poverty line from 1938 to 2012.Although, would a minimum wage increase help the individuals who need that extra bit of income each year? Many adults work minimum wage jobs and support their families and when they are working minimum wage jobs, they are under the poverty line. If the minimum wage were to add up to about $20,000 a year, the families of 3 would live above the poverty line. (Figure 1).Families of three are not the only families living below the poverty line. As of 2016, nearly ½ of single parents earning minimum wage live in poverty. With a income increase, families as well as individuals have the ability to come out of poverty. Bernie Sanders said “The United States must raise the minimum wage to a living wage : $15 an hour”. The minimum wage is not a living wage in many individuals eyes. On the other hand, individuals should be aware of the price needed to provide for themselves and others. Individuals working fulltime minimum wage jobs are above the poverty line according to the 2012 fulltime earnings( Figure 1). These individuals understand that these minimum wage jobs are a stepping stone and that they provide for “basic resources such as food, shelter and transportation” according to Laura Smith and her journal article “Reforming the minimum wage: Toward a psychological perspective.”
Minimum Wage should not be increased because business owners, consumers and current and future employees will be affected negatively by the increase. Individuals seem like they want the extra couple of cents or dollars in the moment when wanting the minimum wage increased but they don’t understand the consequences and rebounds of the income increase. Karen Handel said that “Increasing minimum wage doesn't build a stronger economy.” The importance of economic stability within the government and businesses is more important than the raise of minimum wage.