One of the hottest topics in the U.S. today happens to be the fiery debate of a $15 per hour national minimum wage requirement. While it does appear that the new administration will use their majority in the government to pass a $15 minimum wage bill eventually, it may not happen as soon as some may have thought. Which leaves us to continue pondering, is this a good thing or not? Complex debates such as these are always one of perspective, and as we are proudly a non-partisan and non-biased organization, we take it upon ourselves to report both sides of the argument, from all perspectives and angles. Here, we go into the pros and cons of a $15 minimum wage requirement, from reputable perspectives and sources (economists, statistical researchers, etc.) from both sides of the argument. If you are in support of one over another, feel free to skip around though we do encourage our followers and readers to understand all perspectives. Please let it be noted that for each of these points, there are just as many counter-arguments and we are not indicating any of the following points to be fact or fiction (we are only messengers) – unfortunately we will not be able to dive into all of these today, which is why we encourage our readers to investigate each point themselves and analyze both sides of each argument themselves.
The Case FOR a $15 Minimum Wage
To begin with, we go into a few fundamental points that support a minimum wage hike:
- Minimum wage has not kept pace with inflation. Minimum wage is not indexed for inflation, so has not kept pace with the rising costs of goods and services. The minimum wage in 1968 was $1.60, equivalent to $11.16 in 2016 dollars – which is over 50% larger than the current $7.25 minimum wage. Even in the cheapest markets in the country, a single adult without children will need wages of almost $20/hr and up to cover basic living costs.
- Wage increases for over 20% of U.S. workers. Over 30% of African Americans and over 25% of Latinos stand to receive a raise in pay, and over 55% of the constituents would be women. This would mark a huge victory in the battle against income inequality.
- Poverty would be reduced. There is more of a gray area with this point as there have been multiple studies on this topic, and though many economists argue against the wage increase for other reasons, we see more recent evidence for than against minimum wage in terms of its effect on poverty levels (though counter-arguments from 2014 can be found here and here).
The Case AGAINST a $15 Minimum Wage
Now we dive into some of the fundamental reasons why many are arguing against the $15 minimum wage requirements:
- Loss of jobs. Recent, non-partisan studies by the Congressional Budget Office of the U.S. Congress indicates that in almost all scenarios (though Goldman Sachs did indirectly challenge this notion), there would be a loss of jobs over time. This can probably be attributed to a number of reasons, from more competition due to the higher wages wiping out some traditionally “entry level” jobs, employers adopting technology to offset higher long-term labor costs (see: ghost kitchens), among other reasons. There is also the counter-argument that raising the minimum wage may help people get back to work during the times of COVID-19.
- Inflation. 85% of all restaurant operators would most likely raise menu prices, according to a recent study. A 2015 study by Purdue University and a 2013 study by the Federal Reserve of Chicago also indicated that restaurants would raise prices. This passes some of the higher wage costs directly to the consumer, possibly resulting in a cycle of higher wages that cause higher prices, which cause higher wages, so on and so forth. There is however some research in progress that may indicate that cities may potentially experience less consumer price disturbance.
- It’s a case-by-case basis. In rural areas in some cheaper states, $15 an hour will get a person a very nice apartment and many have saved for a house with similar wages. In other places, even $15 an hour isn’t nearly enough to get by. Most small businesses do not support a rate hike at all (maybe due to COVID-19 instability or because they are still recovering from the pandemic as well), but others would not oppose a staggered approach because they know their employees need to take home more money. In a situation such as this one, it may be easier to let each of the states decide how to handle the minimum wage because there is no “one size fits all” for every economic market in the U.S.
- Benjamin Greeley – Market Research Analyst at FundingFuel. Provided and organized a large chunk of the research for this article.
- US Department of Labor, “History of Federal Minimum Wage Rates under the Fair Labor Standards Act, 1938-2009,” dol.gov
- 2021 Raise the Wage Act
- George Reisman, “How Minimum Wage Laws Increase Poverty,” Mises Institute website, Apr. 4, 2014
- Working at Zillow and developing a deep knowledge of real estate markets and understanding cost of living indexes across the country