minimum-wage.procon.orgShould the Federal Minimum Wage Be Increased?

More IssuesFAQs Teachers’ Corner Minimum Wage Last updated on: 1/12/2023 | Author: ProCon.org History of Minimum Wage The federal minimum wage , introduced in 1938 during the Great Depression under President Franklin Delano Roosevelt, was initially set at $0.25 per hour. The federal minimum wage has been increased by Congress 22 times, most recently in 2009 from $6.55 to $7.25 an hour. Most states plus DC have a minimum wage higher than the federal minimum wage, though several states do not have minimum wage laws (which means workers in those states default to the federal minimum wage). Read more history… Pro & Con Arguments Pro 1 Raising the federal minimum wage would not only allow minimum wage workers to afford basic living expenses, but would also reduce income, gender, and racial inequalities. The current minimum wage is not high enough to allow people to afford housing. According to the National Low Income Housing Coalition, In 2022, a full-time worker needs to earn an hourly wage of $25.82 on average to afford a modest, two-bedroom rental home in the U.S. This… is $18.57 higher than the federal minimum wage of $7.25…. A full-time worker needs to earn an hourly wage of $21.25 on average in order to afford a modest one-bedroom rental home in the U.S.” [ 198 ] Further, 35% of families with full-time year-round employment do not earn enough to pay for essentials including food and childcare. 59% of Hispanic families, 52% of Black families, 25% of white families, and 23% of Asian families that work full-time year-round cannot cover basic needs. Overall, families would need to earn $11 more an hour to cover basic costs, with Black and Hispanic families needing $12 more an hour. [ 199 ] Approximately 91% of workers who would benefit from a raised minimum wage are over 20 years old, with 68% over the age of 25. Most are the primary wage earners for their families, averaging about 52% of their family’s income, and most are women and people of color. The current federal minimum wage prevents these individuals and families from meeting basic needs like shelter and food, as well as creating significant obstacles to healthcare, finances for an emergency, and other expenses such as car upkeep. [ 201 ] Thus, the unaffordability of basic needs drives income, gender, and racial inequality. Workers who have to pinch pennies do not have the money, time, or other resources to invest in more education or job training for themselves and their families, meaning they remain stuck in low-paying jobs with few to no benefits such as sick days, health insurance, or retirement plans. Minimum wage workers are then also subjected to irregular schedules that can make the rest of life, such as picking up kids from school, difficult or impossible. [ 199 ] [ 200 ] [ 201 ] [ 205 ] Increasing the minimum wage would not only bring relief to workers struggling to make ends meet, it would also raise the incomes of people who make slightly more than minimum wage. The Brookings Institution found that increasing the minimum wage would result in higher wages for the 3.7 million people earning minimum wage and up to 35 million workers who make up to 150% of the federal minimum wage. [ 28 ] The White House Council of Economic Advisors (CEA) found that an increase to just $10.10 an hour would raise wages for 28 million Americans–about nine million of those due to the ripple effect. [ 29 ] Read More Pro 2 Raising the minimum wage to match inflation and productivity would benefit the economy by increasing consumer activity and spurring job growth while lowering the federal deficit. Because the federal minimum wage is not indexed for inflation, its purchasing power (the number of goods that can be bought with a unit of currency) has dropped considerably, hitting the lowest mark since 1956. [ 14 ] [ 15 ] [ 16 ] [ 204 ] As journalist Megan Cerullo summarizes, The federal minimum wage of $7.25 buys less today than it has at any point over the past 66 years…. The current value of the minimum wage in real dollars is at its lowest level since February 1956, when the lowest U.S. wage was 75 cents — the equivalent of $7.19 in June 2022 dollars.” Raising the minimum wage and indexing it to inflation would ensure that low-wage workers could adopt a standard of living commensurate with the current economy. [ 204 ] Further, while the estimates of how much the minimum wage should be increased vary, many economists agree that if the wage had kept pace with rising productivity and incomes, it would be higher than the current $7.25 an hour. [14] [17] [18] [ 14 ] [ 17 ] [ 18 ] If the minimum wage matched inflation as well as worker productivity and other incomes, worker productivity would increase while employee turnover decreased. Alan Manning, Professor of Economics at the London School of Economics, explains, As the minimum wage rises and work becomes more attractive, labor turnover rates and absenteeism tend to decline.” [ 30 ] [ 31 ] [ 32 ] [ 33 ] In turn, economic activity would increase, spurring job growth. The Economic Policy Institute stated that a minimum wage increase from the current rate of $7.25 an hour to $10.10 would inject $22.1 billion net into the economy and create about 85,000 new jobs over a three-year phase-in period. And economists from the Federal Reserve Bank of Chicago predicted that a $1.75 rise in the federal minimum wage would increase aggregate household spending by $48 billion the following year, thus boosting GDP and leading to job growth. [ 1 ] [ 2 ] With an economic boom and more securely employed workers, the federal deficit would decrease. According to James K. Galbraith, Professor of Government at the University of Texas in Austin, [b]ecause payroll- and income-tax revenues would rise [as a result of an increase in the minimum wage], the federal deficit would come down.” [ 43 ] Further, raising the minimum wage would help reduce the federal budget deficit by lowering spending on public assistance programs and increasing tax revenue. Since firms are allowed to pay poverty-level wages to 3.6 million people — 5 percent of the workforce — these workers must rely on Federal income support programs. This means that taxpayers have been subsidizing businesses, whose profits have risen to record levels over the past 30 years,” according to Aaron Pacitti, Associate Professor of Economics at Siena College. [ 42 ] Read More Pro 3 Increasing the minimum wage would have numerous social benefits including reducing poverty and crime, and increasing school attendance and the healthy population. A 2022 Urban Institute study found that [i]ncreasing the federal minimum wage to $15 an hour would lift 7.6 million people in the United States out of poverty.” A higher minimum wage would also reduce government welfare spending. If low-income workers earned more money, their dependence on, and eligibility for, government benefits would decrease. The Economic Policy Institute determined that by increasing the minimum wage to $10.10, more than 1.7 million Americans would no longer be dependent on government assistance programs. They report the increase would shave $7.6 billion off annual government spending on income-support programs. [ 10 ] [ 206 ] Raising the minimum wage also lifts children out of poverty, increasing their school attendance and decreasing dropout rates. One study found that raising the California minimum wage to $13 an hour would increase the incomes of 7.5 million families, meaning fewer would live in poverty. Teens who live in poverty are twice as likely to miss three or more days of school per month. The study found that recent experimental studies show that increasing income can improve school performance.” Increasing the minimum wage would also allow teens to work fewer hours for the same amount of pay, giving them more time to study and reducing the likelihood that they would drop out of high school. Alex Smith, Assistant Professor of Economics at the United States...