Minimum wage concerns may be unfounded
May 4, 2016
Many politicians, especially the Democratic presidential candidates, are currently debating over whether or not states should raise their minimum wages. The numbers vary, some say $12 an hour while others say $15, but the intention is always the same: that wage-workers earn enough to live on.
The primary debate concerns what effect raising the minimum wage would have on employment. Some claim that raising the minimum wage would stimulate the economy and increase jobs, while others believe that it would lead to mass unemployment as businesses compensate for higher wages by cutting their workforce.
However, when looking at studies done on the subject, it is clear that the negative effects of a higher minimum wage are negligible at best
About 10 years ago, San Francisco raised its minimum wage from $6.75 to $8.50 and has continued to increase that number over time to its current $10.74.
Researchers from the University of California, Berkley studied the effects of raising the minimum wage in the city and found the difference in employment to be almost nonexistent. To compensate for the higher wages, businesses had smaller turnover, restaurants slightly increased prices, and generally higher productivity of workers was demanded.
Unemployment did not change during this period, mainly due to the wage increase being drawn out over a long period of time, giving businesses time to adjust and absorb the increased wages.
Similarly, a study from the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst found that restaurants could increase their minimum wage over a long period of time and absorb the increased wage bill by reducing turnover and a moderate hike in prices over the period of wage increase.
What these studies are pointing to is that, despite the concerns, raising minimum wage does not lead to an immediate rise in unemployment. It is important to note that there has never been a $15 minimum wage, and some economists are skeptical of such a high increase.
It should be noted that the United States has increased its minimum wage multiple times in the past. Since the minimum wage was first established in 1938 at $.25 ($4.23 in 2015 dollars), it has steadily grown to the current $7.25 established in 2009.
Most low-wage workers are not teenagers or college students, but people in their mid-30s unable to find higher paying jobs. These people often find themselves unable to care for families or maintain a standard of living without taking multiple jobs.
These are the same people who are currently protesting for higher wages, not college students.
As the data seems to suggest, if the United States slowly phased in a higher minimum wage, standards of living for low and lower-middle class workers would improve and businesses would be able to absorb the without slashing their workforce.