Raising the Minimum Wage to $15 is Not as Nice as It Looks

Raising the Minimum Wage to $15 is not as nice as it looks

In 2017:

Oregon- $9.75 California - $10.50

Federal Minimum Wage - $7.25

There is constant discussion in every town from households, to businesses, to congress members concerning the creation of higher minimum wages. This was a popular topic of conversation around the election period and continues to be an especially hot topic among lower-income families, teenagers, and those living in poverty.

Bernie Sanders advocated “A Living Wage” in his presidential campaign and still preaches today as a member of congress that “Millions of Americans are working for totally inadequate wages. We must ensure that no full-time worker lives in poverty. The current federal minimum wage is starvation pay and must become a living wage. We must increase it to $15 an hour over the next several years. (berniesanders.com).

This concept of a “Living Wage” is more broadly defined as “A theoretical wage level that allows the earner to afford adequate shelter, food and the other necessities of life. The living wage should be substantial enough to ensure that no more than 30% of it needs to be spent on housing. The goal of the living wage is to allow employees to earn enough income for a satisfactory standard of living” (www.investopedia.com)

The living wage in the United States is “$15.84 per hour for a family of four (2 working adults and 2 children) in 2016.  “A typical family of four needs to work nearly four full-time minimum-wage jobs (a 78-hour work week per working adult) to earn a living wage. Single-parent families need to work almost twice as hard as families with two working adults to earn the living wage. A single-mother with two children earning the federal minimum wage of $7.25 per hour needs to work 143 hours per week, nearly the equivalent of working 24 hours per day for 6 days, to earn a living wage” (livingwagemit.edu)

THE CONCERN: The minimum wage does not provide a living wage for most American families.

THE SOLUTION: It seems to make a lot of sense to make the minimum wage a living wage, simply adjust the minimum wage to ≈ $15.

WELL… I’m going to use empirical evidence to show why I believe that minimum wage SHOULD NOT be adjusted to the living wage because it does NOT support poor families and people in poverty.  Its effects can actually be most detrimental to them.

Here is an example of a recent proposal in Illinois by NELP (National Employment Law Project)

“The Illinois legislature is considering a measure that would gradually raise Illinois’ minimum wage from its current $8.25 an hour up to $15 an hour by 2022. Analysis of the latest available data shows that, not just in the Chicago area but across the state, single workers without children will soon need $15 an hour or more just to cover the basics – and workers with families will need even more. The typical worker earning less than $15 an hour is an adult over 25 who works full time, but still cannot make ends meet. A $15 minimum wage would deliver a large raise for nearly 1 in 4 workers in Illinois. The economic evidence from other states shows that, if phased in gradually, a $15 minimum wage would be manageable for employers, while delivering broad benefits for Illiniois’ workforce.

Even in low-cost regions of the state, like Danville, East St. Louis and rural Illinois, workers will soon need $15 an hour or more just to cover the basics. For example, by 2022 a single worker in rural Illinois will need to earn $32,178 a year just to cover housing, food, transportation and other basic costs, according to the Economic Policy Institute’s family budget calculator.1 This translates to $15.47 an hour for a full-time worker. Similarly, in Danville and East St. Louis, a single worker will need to earn about $15.55 an hour by 2022 to meet basic living costs."

First of all, many who live in poverty are not affected by the minimum wage, either because they are not employed or because their wages, while low, are already above the minimum.  

Secondly, many of those most affected by the minimum wage are teenagers. Some may not reside in poor families. A study that examined the effects of minimum wages throughout the wage distribution concluded that “only 19 percent of the estimated earnings generated by the higher minimum wage went to families with incomes below the poverty line, while over 50 percent of the increases went to families whose income were at least twice the poverty level”(Smith, 115). .  Therefore, the minimum wage proposition that is allocated to helping poor people is not necessarily affecting them directly or even at all.

Finally, it is so often overlooked is the cost of employers to hire these minimum wage workers at an increased wage. To prove that a $15 minimum wage proposal will not only fail, but also cause an increase in poverty, I will look at employment effects of the first federal minimum wage.

The Employment Effects of the First Federal Minimum Wage – examination of one of the largest manufacturing industries in the South - “A longitudinal survey of 87 firms shows that employment, which had been rising, reversed course and started to fall, even though overall demand for the product and production levels were rising…even more strikingly, employment fell by 17 percent in the mills that had previously paid less than the new minimum wage, while it stayed virtually the same at higher-wage mills…In the first two years of the laws existence, there was a 23 percent decrease in the number of hand-transfer machines, 10 percent increase in fully automatic machines including with higher, more intensive use, and an increase in 27 percent of imports”(Smith,114). The existence of automated substitutes means that employers will employ fewer low-skilled workers when the minimum wage rises.

This all happened within two years of the minimum wage’s enactment!

These are the amount of jobs lost because employers need to reduce employment

 

            
                   

“When you raise the minimum wage, you can point to someone whose earnings just got a boost, whereas it is difficult to see the negative effects on workers who  couldn’t get jobs or who saw their hours cut because of the policy”(PBS).

In conclusion, the minimum wage increase will prove to be detrimental to low income, working class, and poor families. Employers have more of an incentive to hire less low-skilled workers when higher-skilled workers are willing to take the job now that it pays more. And employers have to employ as many workers now because they have to pay workers higher wages. The policy will clearly lead to a substantial loss in jobs, which leads to zero income for many poor families. Collecting zero income or low income in an already impoverished family can and will lead to poor nutrition, poor housing, negative effects on education, and poor medical care.

In order for the minimum wage to work, I think that employers should offer training or education services to increase the employee’s skills to make them more valuable to the labor force. Another way is for employers to somehow provide more benefits to workers support employees, allowing them make more profit and have more spending money.

Works Cited

Ehrenberg, Ronald G., and Robert Stewart Smith. 1994. Modern labor economics: theory and public policy. New York: HarperCollins College Publishers.

Andrew G. Biggs and Mark J. Perry, "A National Minimum Wage Is a Bad Fit for Low-Cost Communities," American Enterprise Institute website, Mar. 26, 2014

"State Minimum Wage Hikes Already Passed Into Law Expected To Cost 2.6 Million Jobs, New Study Finds." ZeroHedge. N.p., 06 Jan. 2013. Web. 25 Apr. 2017.

Rugy, Veronique De. "Column: Why a $15 Minimum Wage Should Scare Us." PBS. Public Broadcasting Service, 09 Sept. 2016. Web. 25 Apr. 2017.

"A Minimum Wage for Farm Workers." Monthly Labor Review 83.7 (1960): 677-85. Web.

http://livingwage.mit.edu/articles/23-results-from-the-2016-data-update

http://www.investopedia.com/terms/l/living_wage.asp.