what are the benefits of raising minimum wage

• Raising the minimum wage increases worker productivity . Studies by leading economists, including Nobel laureate George...
• Raising the minimum wage reduces turnover . Higher wages lead to lower employee turnover, resulting in reduced...
• Raising the minimum wage reduces absenteeism . When workers earn higher wages they are absent from work less, leading to...

Full Answer

What are the positives of increasing minimum wage?

• Reduce employment by 1.4 million jobs
• Increase the federal deficit by $54 billion over 10 years
• Increase prices for goods and services

What are the pros and cons of raising minimum wage?

Raising the minimum wage: the pros and cons. As with most things having to do with business, there are broad-based economic pros and cons to a minimum wage increase. The pros of this change include: Boosting the economy: A great way to boost the economy is to give people the funds they need to purchase products, goods and services. Increasing ...

Who benefits from increasing the minimum wage?

The minimum wage is for both full-time and part-time permanent ... Any tuition increase (where) the burden is borne by those who can afford it, so to speak, and the benefit of that tuition increase is focused on making the University more affordable ...

What are the problems with raising minimum wage?

“Increasing the minimum wage puts more money into the pockets of the workers, which gives local businesses more customers. Boosting wages also increases productivity and decreases turnover.” The plan would raise the minimum wage to $12 per hour on July 1 with a $0.50 annual increase until reaching $15 per hour by July 1 of 2027.

What are the positive effects of raising minimum wage?

Raising the federal minimum wage to $15 an hour would improve the overall standard of living for minimum wage workers. These workers would more easily afford their monthly expenses, such as rent, car payments, and other household expenses.

What are the advantages and disadvantages of raising minimum wage?

Raising the federal minimum wage to $15 an hour is a policy goal for many lawmakers. Increasing the minimum wage is expected to lift individuals out of poverty and improve work ethic, however, it also comes with many possible negative implications, such as inflation and a loss of jobs.

Will prices go up if minimum wage increases?

Despite the different methodologies, data periods and data sources, most studies found that a 10% US minimum wage increase raises food prices by no more than 4% and overall prices by no more than 0.4%. This is a small effect.

Why is raising minimum wage bad?

So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. This is one reason why 72 percent of US-based economists oppose a federal minimum wage of $15.00 per hour.

What are the negative effects of raising the minimum wage?

Opponents of raising the minimum wage believe that higher wages could have several negative repercussions: leading to inflation, making companies less competitive, and resulting in job losses.

When will the minimum wage increase to $15?

Michael J Boyle. Updated Apr 27, 2021. On July 18, 2019 , the U.S. House of Representatives passed an amended version of the Raise the Wage Act of 2019, which would gradually increase the federal minimum wage to $15 an hour by 2025.

Why should the minimum wage be $15 an hour?

Raising the federal minimum wage to $15 an hour is a policy goal for many lawmakers. Increasing the minimum wage is expected to lift individuals out of poverty and improve work ethic, however, it also comes with many possible negative implications , such as inflation and a loss of jobs.

How much will the minimum wage be in 2025?

A 2019 Congressional Budget Office (CBO) report projected a significant improvement in the standard of living for at least 17 million people, assuming a minimum hourly wage of $15 by 2025, including an estimated 1.3 million people being elevated above the poverty line.

What are the problems of increasing the minimum wage?

Another projected problem resulting from an increased minimum wage is that of potential job losses. Many economists and business executives who point out that labor is a major cost of doing business argue that businesses will be forced to cut jobs to maintain profitability.

What does increased prices mean?

Increased prices mean a general increase in the cost of living that could essentially negate any advantage gained by workers having more dollars in their pockets. Though the current federal minimum wage in the U.S. is $7.25 per hour, 29 states and D.C. have approved higher minimum wages. 1 .

Will the minimum wage be raised in 2020?

With Joe Biden winning the presidential election in November 2020, a federal minimum wage of $15 an hour might be closer, as it is one of his policy agendas. The discussion around the increase in the federal minimum wage brings both pros and cons.

Stimulating the Economy

One theory about raising the minimum wage is that it will help to boost the American economy as a whole. It seems perfectly logical: when workers have more money in their pockets, they spend more.

Improving Entitlement Programs

Raising the minimum wage offers two potential benefits for entitlement programs like Food Stamps and Social Security. First, raising the minimum wage will theoretically lift many of the working poor above the poverty line, meaning they’ll no longer need to rely on food stamps or other assistance programs.

Decreasing the Turnover Rate

My boss at the bagel shop certainly understood the importance of low turnover: the more turnover you have, the more you spend to hire and train your staff. That’s why Pop treated us kids well, since he didn’t want us quitting after seeing the bulging forehead vein of anger go off in our direction.

The Bottom Line

The expected benefits of increasing the minimum wage are all based upon educated predictions and assumptions, but we can’t know for sure what a wage hike will bring. The benefits are unclear — and, as we’ll see next week, the expected drawbacks are similarly difficult to pin down.

Why is raising the minimum wage important?

Here are six simple reasons why raising the minimum wage makes sense. 1. It is long overdue. Since it was last raised in 2009, the minimum wage has failed to keep up with inflation, failed to keep up with average wages, and—most dramatically—failed to keep up with incomes of the top 1 percent and CEOs, contributing to America’s growing inequality ...

How many people would benefit from raising the minimum wage to $15/hr?

A 2019 Oxfam report shows that raising the minimum wage to $15/hr would benefit 40 million workers and their families. (Photo by: Jeffrey Greenberg/UIG via Getty Images)

What percentage of small businesses support $15 an hour?

In one recent poll, 67 percent of small business owners support the minimum wage increase to $15 an hour. They say it would spark consumer demand, which would enable them to retain or hire new employees. And raising the wage doesn’t seem to compel employers to cut jobs.

How much money would be pumped back into the economy?

The roughly $120 billion extra paid to workers would be pumped back into the economy for necessities such as rent, food, and clothes. Economists have long recognized that boosting purchasing power by putting money in people’s pockets for consumer spending has positive ripple effects on the entire economy.

How much does a CEO make in 2019?

The average CEO at one of the top 350 firms in the US made $21.3 million in 2019, 320 times as much as the typical worker; a minimum wage worker still makes $15,080: a gap of 1,400 to 1. 2.

How many states have raised minimum wage?

Twenty-two states and the District of Columbia have raised minimum wages since 2014 (see here for state minimum wage policies). Forty local governments have their own minimum wage, as compared to five in 2012. A number of states, including California and New York, are phasing in increases to levels as high as $15 per hour.

What was the minimum wage in 1968?

The Federal minimum wage is $7.25, as compared to $1.60 in 1968. But prices have risen faster than the minimum wage, eroding its purchasing value. Taking inflation into consideration, the 1968 minimum wage would be worth $9.25 in today's dollars, and its value in that year represents the historically-highest minimum wage when adjusting ...

What percentage of workers are working full time in 2017?

In March 2017, just 3.2 percent of workers earned at or below their state’s minimum wage (5.5 percent of workers who are paid by the hour), and only 31 percent of them were working full-time (35 or more hours per week). Fully half were under the age of 25 and three-quarters under the age of 35; 28 percent were currently enrolled in school.

Do minimum wage workers live in low income households?

Most minimum wage workers, therefore, do not live in low-income households (see chart). The fact that the composition of the minimum wage workforce is not tilted towards low-income households is not a new observation: only a quarter of minimum wage workers were poor in the mid-1980s, and about 30 percent in the mid-1990s.

Is the minimum wage high or low?

The Federal minimum wage is low by historical standards — when adjusted for inflation — and has not been increased since 2009. As a response, many states and municipalities have set local minimum wage policies above the Federal level. The Federal minimum wage is $7.25, as compared to $1.60 in 1968.

Is the minimum wage an effective tool?

What this Means: The minimum wage is not an effective tool to reduce poverty or income inequality. Many of the beneficiaries do not live in low-income households. Moreover, there is some evidence that workers who earn the minimum wage tend to see relatively rapid gains in hourly wages as they acquire experience.

Does raising the minimum wage raise wages?

It’s unclear if the minimum wage ripples up to raise wages higher up the pay scale. If raising the minimum wage induces firms to offer higher wages at levels above the mandated minimum, the policy might have a broader impact than if the effect is limited to those who earn at the minimum wage level. However, whether this happens is subject of debate.

What are the advantages of minimum wage?

List of the Advantages of a Minimum Wage. 1. A minimum wage gives people an incentive to work. Imagine a choice between working for $3 per hour and working for $7.25 per hour. If all things are equal in your situation, then most people would choose the job with a higher wage. When there is a minimum wage for workers, ...

Why is minimum wage important?

A minimum wage allows workers to invest in themselves. When a minimum wage meets more than the basic needs, then it allows an individual to pursue their own goals, dreams, or interests. Many employers today offer educational assistance programs which pay for tuition or permit flexible hours to continue schooling.

How does minimum wage affect local communities?

5. A minimum wage shifts the economic foundations of local communities. If someone is guaranteed an income without working, then there is little motivation for them to work. When a minimum wage guarantees a specific income, workers become motivated to do only what they must to maintain their employment.

What is the minimum wage in Washington State?

The minimum wage in Washington State is $11.50 per hour (as of 2018), while in California it is $11 per hour, and Oregon requires $10.75 per hour. Workers who are paid through tipping have a $2.13 federal minimum if they earn at least $30 tips for their shift, but their total wages must also equal the $7.25 per hour minimum standard.

What did the Fair Labor Standards Act of 1938 do?

passed the Fair Labor Standards Act of 1938, it did more than set a minimum wage for workers. It created several additional federal protections that employees received for the first time, including overtime pay, child labor restrictions, and recordkeeping requirements.

Why did the minimum wage lose 9.6%?

Between 2009-2016, that wage lost 9.6% of its overall purchasing power due to the effects of inflation. When payment levels are adjusted for inflation, it was 1968 when the minimum wage held the most value. That’s why some states in the U.S. have an automatic inflation adjustment tied to their minimum wage.

How long does it take to earn more at minimum wage?

That job knowledge gives them a skill over time which becomes more valuable to their current employer or a future one. Most people begin earning more in 12 months or less when they accept an initial position at the minimum wage. 2. Workers can live comfortably when the minimum wage meets their needs.

What would happen if the minimum wage was increased to $15?

Raising the minimum wage to $15 will be particularly significant for workers of color and would help narrow the racial pay gap. Nearly one-third (31%) of African Americans and one-quarter (26%) of Latinos would get a raise if the federal minimum wage were increased to $15. 6. Almost one in four (23%) of those who would benefit is a Black ...

How many states have raised minimum wage to $15?

Since the Fight for $15 was launched by striking fast-food workers in 2012, 9 states representing approximately 40% of the U.S. workforce —California, Connecticut, Florida, Illinois, Maryland, Massachusetts, New Jersey, New York, Virginia, and the District of Columbia— have approved raising their minimum wages to $15 an hour. 10

How much will the $15 minimum wage be in 2025?

A $15 minimum wage by 2025 would generate $107 billion in higher wages for workers and would also benefit communities across the country. Because underpaid workers spend much of their extra earnings, this injection of wages will help stimulate the economy and spur greater business activity and job growth.

What is the minimum wage in 2021?

The Raise the Wage Act of 2021 would gradually raise the federal minimum wage to $15 an hour by 2025 and narrow racial and gender pay gaps. Here is what the Act would do: Raise the federal minimum wage to $9.50 this year and increase it in steps until it reaches $15 an hour in 2025. 2. After 2025, adjust the minimum wage each year to keep pace ...

What is the Raise the Wage Act?

The Raise the Wage Act follows the lead of the growing number of states and cities that have adopted significant minimum wage increases in recent years, thanks to the ‘Fight for $15 and a union’ movement led by Black workers and workers of color.

How much do you need to work an hour in Missouri?

For example, in rural Missouri, a single adult without children will need $39,800 (more than $19 per hour for a full-time worker) by 2025 to cover typical rent, food, transportation, and other basic living costs.

How many people get raises in nursing homes?

More than one-third (35%) of those working in residential or nursing care facilities would see their pay increase, in addition to home health aides and other health care support workers. One in three retail-sector workers (36%) would get a raise, including 42% of workers in grocery stores.

What is the impact of raising the minimum wage?

A raise in the minimum wage predominantly benefits low-wage workers, precisely those most likely to put additional income directly back into the economy, kick starting a virtuous cycle of greater demand for goods and services, job growth, and increased productivity.

Why is the minimum wage important?

Studies by leading economists, including Nobel laureate George Akerlof of Georgetown University, found that employee morale and work ethic increase when employees believe they are paid a fair wage. Economists have also linked higher wages to better physical and mental health, which leads to higher productivity.

How does raising the minimum wage affect the economy?

Raising the minimum wage increases consumer spending and boosts the economy . A study by Doug Hall and David Cooper estimated that a $2.55 increase in the minimum wage would increase the earnings of low-wage workers by $40 billion and result in a significant increase in GDP and employment.

How many people support raising the minimum wage?

A national survey conducted by Hart Polling found that 75 percent of Americans support raising the federal minimum wage to $12.50 by 2020—including 92 percent of Democrats, 73 percent of Independents, and 53 percent of Republicans.

What percentage of business executives support raising the minimum wage?

A survey conducted by Republican pollster Frank Luntz that was leaked to the Washington Post in April found that 80 percent of business executives supported increasing the minimum wage.

How many states have raised the minimum wage?

Since 2014, 16 states have raised their minimum wage, including red states like Alaska, Arkansas, Nebraska, South Dakota, and West Virginia. Republican and Democratic presidents have supported minimum wage increases.

Does raising the minimum wage increase absenteeism?

Raising the minimum wage reduces absenteeism . When workers earn higher wages they are absent from work less, leading to increased productivity. A 2010 paper from economists Laura Bucilia and Curtis Simon concluded that higher minimum wages are associated with lower rates of absenteeism for reasons other than illness.

How would a higher minimum wage help the poor?

By boosting the income of low-wage workers with jobs, a higher minimum wage would lift some families’ income above the poverty threshold and thereby reduce the number of people in poverty. But low-wage workers who lost employment would see their earnings decrease, and in some cases their family income would fall below the poverty threshold.

What would happen if the minimum wage was raised?

As a result, some employers would employ fewer workers than they would have under a lower minimum wage. However, for certain workers or in certain circumstances, employment could increase.

What would happen if wages increased faster than CBO?

If wages grow faster than CBO projects, then wages in future years will be higher than CBO anticipates , and increases in the federal minimum wage would have smaller effects. If wages grow more slowly than CBO projects, the effects would be larger.

How would increasing the minimum wage affect family income?

How would increasing the minimum wage affect family income? By boosting the income of low-wage workers who had jobs, a higher minimum wage would raise their families’ real income, lifting some of those families out of poverty. However, income would fall for some families because other workers would not be employed and because business owners would have to absorb at least some of the higher costs of labor. For those reasons, a minimum-wage increase would cause a net reduction in average family income.

When will the minimum wage be $15?

Raise the minimum wage to $ 15 by 2026 and gradually raise the tipped cash minimum to be the same as the regular minimum. Thereafter, index both wages to the median wage. Eliminate the subminimums for teenagers and disabled workers.

What does indexing mean for minimum wage?

Further Adjustments to the Minimum Wage: Indexing the minimum wage means automatically adjusting it after it reaches the target amount. Past increases in the federal minimum wage have not been indexed, so the value of those increases has been eroded by inflation. In this interactive tool, users can:

What are the changes in real family income?

Changes in real family income include increases in earnings for workers receiving a higher wage, decreases in earnings for workers made jobless, losses in income for business owners, and decreases in purchasing power because of increases in prices. Subminimums for teenagers and disabled workers.

Why is raising the minimum wage good?

First, employees who are paid a higher wage tend to be more productive due to morale improvements, better health, less absenteeism and reduced “decision fatigue.”.

How many children benefit from raising the minimum wage?

Second, children disproportionately benefit from increasing the minimum wage. Across the United States, 28.2% of children have a parent affected by increasing the federal minimum wage to $9.80, and even more have a parent who would be affected by a higher minimum wage hike.

What is the minimum wage increase for $7.25 an hour?

For example, if a worker for $7.25 an hour receives a 10% pay raise to $7.98 an hour, they can expect a good that cost $7.30 before the minimum wage increase to cost just $7.32 after the minimum wage hike. Even with that slight price increase, the worker is vastly better off.

What is the minimum wage for non-exempt workers in 2020?

As of 2020, the federally mandated minimum wage of $7.25 for non-exempt workers is not enough to lift a family of two above the poverty line. The slow growth of wages in comparison to productivity is not universal: ...

What is the second assumption of wage employers paying the equilibrium wage?

The second assumption — that wage employers pay the equilibrium wage — ignores the existence of “labor monopsonies.”. A “monopsony” is a market with only one buyer — in terms of employers, it is a market with only one (or very few) employers.

When was the minimum wage established?

The United States minimum wage originated with the Fair Labor Standards Act of 1938 (FLSA), which also set overtime pay and child labor restrictions. The contemporary opposition to the FLSA foreshadowed the current arguments against raising the minimum wage.

What percentage of small businesses support raising the minimum wage?

However, if that’s true, someone forgot to tell the owners of small businesses — a study conducted by the American Sustainable Business Council found that 61 percent of small business owners across the US support raising the minimum wage.