Raising the minimum wage

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by Alfredo Ortiz

As the 116th Congress settles in and begins to pursue its legislative agenda, one item that is likely to be included on the docket is the $15 minimum wage. Although the politically split Congress will be plagued with gridlock, some Democrats will push the issue in order to raise support for the 2020 election.

There is significant public support behind raising the federal minimum wage from the current level of $7.25 an hour. According to recent polling from the Job Creators Network and scottrasmussen.com, nearly three-quarters of Americans support higher mandated pay.

However, though polling shows a majority of Americans are behind raising the minimum wage, roughly the same number are aware of the associated consequences. Sixty-eight percent believe a $15 minimum wage would result in fewer jobs and 72 percent say the policy would force businesses to reduce working hours.

The public’s understanding of the economic impacts are quite accurate. One example is Seattle, WA, which started to slowly move to a $15 minimum wage beginning in 2015 and officially hit $15 an hour at the start of 2018.

According to a study from the University of Washington, which measured the intermediary impact of the city’s rising minimum wage, employers were forced to reduce worker hours in order to keep up with rising labor costs. More specifically, employees earning the new mandated wage received, on average, a 9-percent cut in working time.

Many businesses, especially small ones, have tight budget constraints and low profit margins. So, when the price of labor increases significantly, employers must either reduce hours or cut staff in order to stay open. In some cases, even these drastic measures won’t make enough of a difference and businesses may be forced to shut their doors for good.

But what about the claim that workers will be more fairly compensated for the hours they do work?

Employees making the higher minimum wage are now earning more per hour by definition, but there is a cost. While the same study from the University of Washington does support that assertion and reveals average wages increased by 3 percent, average monthly earnings for low-wage workers actually fell by $125. When employees are given the option, they would prefer a larger income overall, rather than being better compensated for fewer hours.

A minimum or entry-level wage is intended to act as training wheels, giving entry-level workers the opportunity to learn necessary skills that will help them attain higher-paying employment in the future. Forcing these rates upward likely will cut down on the number of these valuable learning experiences.

Some may argue that a minimum wage should be a “living wage,” whereas others say it should remain a teaching one. That way, more Americans will have the opportunity to climb the career ladder and pursue the American Dream.

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