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The Minimum Wage Debate

September 22, 2015

Last month, the city of Los Angeles increased its minimum wage from $9 to $15. In doing so, the city became one of the largest ones to raise its minimum wage and propelled the push to raise minimum wage levels nationally. The arguments used for and against raising the minimum wage in Los Angeles are the same ones used across the country: those in favor of it believe it will help reduce or eliminate poverty and keep the minimum wage at a “living wage” level, whereas those against it say it will increase unemployment and put significant fiscal pressure on small businesses.[1]

By Avikar Govil, W’18

As demonstrated in Los Angeles, one of the primary arguments for raising the minimum wage is that doing so will eradicate poverty. A 2014 report by the Congressional Budget Office (CBO) explored two potential options for raising the minimum wage to different levels and its effects on poverty. In one scenario, the minimum wage was raised from $7.25 to $10.10. The CBO determined that the increase would “[boost the] average family income by about 3 percent…moving about 900,000 people, on net, above the poverty threshold.”[2] CNN conducted a similar study in which it looked at the effects of raising the minimum wage to $10.10, through which it concluded that such a raise would “lift more than 5 million Americans out of poverty and help 14 million children see a boost in their family income. Fourteen million women, including 6 million working mothers, would get a raise”[3].

Another prominent argument for raising the minimum wage is that, in general, the minimum wage has not kept up with a number of standards, such as inflation rates, the cost of living, and increased productivity. In a statement made by the mayor of Los Angeles in support of getting the city’s minimum wage raised, “we’re not going to wait for Washington to lift Americans out of poverty…we have too many adults struggling to be living off a poverty wage. This will re-establish some of the equilibrium we’ve had in the past”[4]. Mayor Bill de Blasio of NYC supported this sentiment stating, “Los Angeles is another example of a city that’s doing the right thing, lifting people up by providing a wage on which they can live”[5]. Essentially, the minimum wage is no longer a wage people can live off of as lawmakers have failed to adjust it according to rising prices.

Despite these arguments, opponents of raising the minimum wage believe that doing so would harm small businesses and force them to cut jobs. As the minimum wage increases, so does a business’ operating costs. Therefore, businesses can turn to two different options: they can increase their prices to offset the increase in costs or they can reduce their labor force to cut costs altogether[6]. While the former option is the more favorable one from the standpoint of reducing unemployment, the latter is the likelier option and the primary argument used by opponents of raising the minimum wage. According to the report done by the CBO, raising the minimum wage to $10.10 could result in as many as 500,000 lost jobs, while a raise to $9.00 would result in a loss of up to 100,000 jobs[7]. Such a move could especially hurt younger, inexperienced workers who often earn minimum wage; if employers are forced to pay higher wages, they are likely to hire more skilled workers whose production meet or exceed the amount they get paid.[8]

Estimated Effects of a Minimum Wage Increase 

On the left, Democrats have generally favored raising the minimum wage. Senator Bernie Sanders, currently #2 in the Democratic polls, has already stated he wants to raise the minimum wage nationally to $15. While those on the left have favored raising the minimum wage and have been the primary ones pushing for such action, Hillary Clinton, considered the favorite to win the Democratic nomination, seems to support “local efforts” to raise the minimum wage rather than proposing a national raise stating, “what you can do in L.A. or in New York may not work in other places.”[9]

On the right, however, Republicans are vehemently arguing against any plans to raise the minimum wage, especially President Barrack Obama’s plan to raise it to $10.10. A number of prominent presidential candidates have spoken out against such action, such as Senator Marco Rubio who does not want to see people losing jobs due to higher wages[10], or former Florida Governor Jeb Bush who stated, “We need to leave it to the private sector. I think state minimum wages are fine. The federal government shouldn’t be doing this.”[11]

With such an emphasis being placed on issues like income inequality, decreasing unemployment, and growing the middle class, the debate surrounding minimum wage will likely play a prominent role in the 2016 Presidential Election and beyond.

  [1]  Medina, Jennifer, and Noam Scheiber. “Los Angeles Lifts Its Minimum Wage to $15 Per Hour.” The New York Times. May 19, 2015. Accessed August 2, 2015. http://www.nytimes.com/2015/05/20/us/los-angeles-expected-to-raise-minimum-wage-to-15-an-hour.html..

  [2] “The Effects of a Minimum-Wage Increase on Employment and Family Income.” Congressional Budget Office. February 18, 2014. Accessed August 2, 2015. https://www.cbo.gov/publication/44995.

  [3] Offenheiser, Raymond. “Opinion: Why Raise Minimum Wage? - CNN.com.” CNN. June 20, 2014. Accessed August 2, 2015. http://www.cnn.com/2014/06/20/opinion/offenheiser-minimum-wage/.

  [4] Medina, Jennifer, and Noam Scheiber. “Los Angeles Lifts Its Minimum Wage to $15 Per Hour.”

  [5] Medina, Jennifer, and Noam Scheiber. “Los Angeles Lifts Its Minimum Wage to $15 Per Hour.”

  [6] Patton, Mike. “The Facts On Increasing The Minimum Wage.” Forbes. Forbes Magazine, 26 Nov. 2014. Web. 20 July 2015.

   [7] Congressional Budget Office. “The Effects of a Minimum-Wage Increase on Employment and Family Income.” 

  [8] Greiner, Bill. “Too Topical To Let Pass By - The Minimum Wage Debate.” Forbes. Forbes Magazine, 03 June 2015. Web. 20 July 2015.

  [9] Krieg, Gregory. “Hillary Clinton Just Set Herself Apart From Bernie Sanders on This One Critical Point.” Mic. July 17, 2015. Accessed August 2, 2015. http://mic.com/articles/122461/hillary-clinton-declines-to-endorse-15-minimum-wage.

  [10] Bykowicz, Julie. “The Republican Approach to the Minimum Wage.”Bloomberg.com. Bloomberg, 26 Jan. 2015. Web. 20 July 2015.

   [11]Benen, Steve. “Jeb Bush Makes the Case against the Federal Minimum Wage.” Msnbc.com. March 18, 2015. Accessed August 2, 2015. http://www.msnbc.com/rachel-maddow-show/jeb-bush-makes-the-case-against-the-federal-minimum-wage.

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