Raising the minimum wage has become a hot topic of debate in the US. As per a report from the Economic Policy Institute, increasing the federal wage to $15 per hour would increase the wages of 33.5 million workers by 2025 in the country. The boost in the wages of low-wage workers will lift the wages of workers by $2,800. This also hints that an order taker and burger flipper at McDonald’s would end up making over $30,000 per year.
Who Would Benefit from an Increase in Minimum Wages?
The rise in minimum wages would benefit 33.5 million workers which include 19.6 million full-time workers, 4.6 million single parents, 19.5 million women, 9.4 million parents, and 6.2 million workers living in poverty.
Research studies highlight that raising the minimum wages would certainly have some effect on employment. According to 15 academic studies, small employment effects would be noted. However, some studies have highlighted grave job losses with the move.
Although those earning a federal minimum of $7.25 would have their wages doubled, this would also result in job loss at the lower end of the spectrum. There are conflicting views on raising the minimum wages.
Benefits of Raising Minimum Wages
Ben Zipperer, an economist at the Economic Policy Institute in Washington, D.C believes that every working individual deserves fair pay and a good job along with retirement security and affordable healthcare. He believes that having a minimum wage of $15 by 2024 would be more of an important corrective. The move will ensure that the low wage workers will also get to receive the benefits of economic growth by then.
Economic research done on the topic highlights that an increase in minimum wages will have no negative consequences. Instead, it will support low-wage workers who are mostly women and people of color. He further stressed that soon workers in every region of the country will need a minimum of $15 to maintain adequate standards of living.
Raising the minimum wage has long been overdue. Despite the capacity of the economy to deliver higher wages, not much has been done in this regard. The increase in the minimum wage as proposed under the Raise the Wage Act of 2019 is an important corrective to the failure to raise the minimum wage. This move would translate a portion of labor productivity gains into higher standards of living for low-wage workers. The proposal focuses on increasing the wage gradually in phases and not immediately if the bill is sanctioned. If the law is enacted, then the workers with the lowest wage would make more than what was being made in 1968. This bold move will certainly improve the living standards of workers.
Economic Research Backs The Bold Move
Source: The Orion
Minimum wage is the most widely studied topic in economics. Although it is a controversial topic, there is sufficient evidence to prove that minimum wage does not have any substantial negative consequences on employment.
There have been some positive outcomes in the past by raising the minimum wages. The last move in the US was made in the late 1960s. The significant rise in wages during the period did not have any impact on the employment of low-wage workers. The benefits of increasing the minimum wage compensate for any potential costs of the policy.
In fact, workers in every region will soon need a minimum of $15 per hour pay. By 2024, workers with no children in the United States will have to earn a minimum of $15 per hour on a full-year and full-time basis to maintain adequate standards of living. A Family Budget Calculator has been developed by colleagues of Mr. Zipperer to delineate how much money a family would have to earn to pay for food, housing, childcare, transportation, taxes, healthcare, and other necessities.
Earning a minimum of $15 per hour would be essential for parents who dream of raising families. If two adults working for 40 hours per week and earn $15 per hour, then they would be earning $62,400 per year. If these adults have two children to take care of, then by the year 2024, there will be no area in the country where they would be able to meet the basic requirements based on their wages alone. Moreover, the Budget Calculator does not take into account any savings for retirement or for purchasing a home. It simply considers the minimum amount required for paying for a family’s needs.
Most low-wage workers are adults and this includes women as well. Often, minimum wage workers are characterized as young workers or teenagers. This is not true. If minimum wages are increased to $15 per hour, then about 91 percent of workers who will receive a wage increase would be 20 or older. A typical worker who would benefit from this move would actually be a breadwinner for a family.
Low wage workers are more likely to be women. This implies that the current minimum wage of $7.25 would hurt women, Black, and Hispanic workers. Women make 48% of the total workforce in the US. About 34% of Hispanic workers and 40% of black workers would receive an increase with this move. Hence, increasing the minimum wage can be considered to be an important tool for lowering the inequality that persists in society.
The Drawback of Raising Federal Wages
Many are wondering what the impact of increasing the minimum wage would be on employment. Historically, high unemployment has been associated with high inflation. Raising the minimum wage will stimulate the economy due to an increase in the spending power of the workers who have received a raise. This can further have a devastating impact on employment as per the former CEO of one of the biggest employers in the US. But again, by gradually increasing the wage over the years instead of doing it at once could alleviate these concerns.
Minimum wages have been an effective tool in ensuring that the workers are receiving adequate pay in any country. However, there has been a failure in implementing the changes periodically. American workers have been denied any significant improvements in their standard of living. This is the reason why low-wage workers today earn quite less in comparison to what their counterparts made over five decades ago. Raising the minimum wage will provide a much-needed boost to the income and will also improve their standard of living