The minimum wage laws in the United States are set by the US labor department and a range of state and local agencies. Employers generally have to pay workers the highest minimum wage prescribed by federal, state, and local law. Debates have sparked in the media and elsewhere recently on the issue of how increases in the minimum wage are changing.
The Controversial Debate
There are groups that support both sides of the issue: one is in favor of raising the minimum wage, while the other is not. Those opposed to raising the minimum wage usually argue that the federal government should not be in the business of regulating pay. It’s anti-capitalism, they say, and potentially harmful to the U.S. economy. But where will it stop? Should corporations be able to pay their employees any rate they want? Or are all U.S. citizens entitled to at least a certain, reasonable income? Those who support raising the minimum wage say that their opponents are focusing on all the wrong questions. After all, the real value of the federal minimum wage has declined 24% since 1968 due mostly to inflation. Today, the federal minimum wage of $7.25 per hour leaves an adult with two children thousands of dollars below the federal poverty threshold.
The Raise the Wage Act, which passed in 2017, will hike the federal minimum wage to $15 an hour by 2024. The act would then index the minimum wage to the median wage to keep low-wage workers’ pay changing at the same pace as the pay of middle-wage workers. Eventually, the law would phase out the loopholes in the federal minimum-wage law that set subminimum wages for tipped workers, teenagers who’ve just started their jobs, and workers with disabilities. The uncharted nature of the proposed increase means that past minimum wage research is not necessarily a reliable guidepost in this case.
Arguments In Favor Of Minimum Wage Raises
Supporters of the bill raising minimum wage claim that it’s not only a good idea, but that doing so will stimulate consumer spending, help businesses’ bottom lines, and grow the economy. A pay increase could potentially increase productivity and decrease employee turnover. It would also boost the overall economy by generating increased consumer demand. Raising the minimum wage may also increase worker productivity. George Akerlof reported that morale and work ethic increase when people feel that they’re being paid fairly. This seems rather obvious when you think about it. Economists have also linked higher wages to better physical and mental health and reduced “decision fatigue,” leading to higher productivity and potentially lower turnover.
The Alleged Problem
According to some, minimum-wage-raise opponents’ analysis of the issue may be too simplistic. Their claim that raising the minimum wage will increase prices and therefore decrease consumption is something of a red herring. There are both pros and cons to minimum wage laws. In some cases, higher labor costs lead to more automation which obviously decreases employment numbers. That’s the potentially pernicious side to increase the minimum wage. Minimum-wage increases also generate “more purchasing power among households with higher propensities to spend their income.