Why is it that so many people today call for a raise in the federal minimum wage? Most will say that the goal of raising the minimum wage is to bring people out of poverty who live in low income households, or families. Drastic changes in the minimum wage have not been made by the government recently though because of the potential for a large economic backlash. With over 1.3 million Americans working for the current federal minimum wage of $7.25 hourly, how this issue is handled will have a large impact on the United States economy. The argument will be made that the current federal minimum wage should not be raised in near future.

Lots of excellent points about how a minimum wage increase would have a negative effect on the economy are pointed out and explained by Director of the Center for Economics and Public Policy at the University of California, Irvine, David Neumark. In his paper about the effects of minimum wage on employment, he focuses on some common misconceptions that a lot of people have about the subject of minimum wage. One problem is that people often don’t realize the difference between minimum wage workers and low skilled workers (Neumark, 2015). 

In an increasingly competitive work force, most of the people in poverty are not necessarily working for the minimum wage, they just happen to be the lower skilled workers. So raising the federal minimum wage would directly result in employers raising their standards for workers because they want to have the most efficient workers as possible to accommodate for the sudden increase in the amount of money they are required to pay for an entry level job (Huppke, 2014). Once employers raise their standards for workers, only people who are more highly skilled with more job experience will be able to fill those positions. Not only will lower skilled workers be at a large disadvantage from a minimum wage increase by being less likely to find a job, but other workers who currently hold minimum wage jobs would be let go to make room for workers with more skills or experience, which would ultimately result in a growth of unemployment rather than a decrease. In fact, an extensive survey done by Neumark and Wascher found that nearly two-thirds of the more than one hundred newest minimum wage studies found consistent evidence of job loss effects on the lower skilled workers when the wage floor was increased (2015).

 A common argument made by people who want the minimum wage raised, is that the current federal minimum wage has not grown consistently with inflation rates otherwise the minimum wage would be somewhere between $10.10-$12.50 an hour, but what it the minimum wage ought to be in accordance to what the rate of inflation is does not tell the whole story. The federal increases from 2007-2014 are about four point one percent which was a faster growth than the rate of growth average wages in the economy (Wilson, 2012).  Furthermore, when discussing inflation rates with minimum wage, it is somewhat irrelevant what the required wage should be because regardless of what is fair or unfair, corporations would still raise their prices on goods to be able to pay their workers and maintain a steady supply and demand balance if a raise in the minimum wage was to occur.

Another strong argument against raising the minimum wage is a sort of model of how a minimum wage increase will hollow out any metropolitan area’s economy. This method is explained by attorney, and political commentator, Ben Shapiro. He points out that when looking at the economic circulation of a certain city or metropolitan area, simply requiring employers to pay workers more money raises the cost of living (Shapiro, 2016). Once the cost of living goes up, things such as rent become much more difficult for people to pay. When rent goes up, and more people than before the minimum wage was raised can’t afford to pay their rent, then affordable housing has to be built. Once affordable housing has to be built, that money has to come from somewhere. What ends up happening is that taxes in this example city are raised to build affordable housing. So, if taxes are being raised even higher than they are now, because the middle class is cut down by high taxes as it is, people will start to move out of the city and into the suburbs to avoid having all of their money taken to build affordable housing. Now once people begin to move out of the city to avoid higher taxes, the city is then forced to raise taxes even higher on those that remain in the city.

 This trend of raising the minimum wage then the cost of living going up, so taxes are raised to the point where more and more people move away from the city so taxes go up more just continues in a downward spiral until all of the people left in the city are impoverished by either high taxes or loss of their jobs because these companies in the city either went out of business, or moved elsewhere because of the high wages they were forced to pay workers.

Another very important thing to keep in mind when addressing this subject is that it is difficult to observe the downsides and even the upsides of a federal minimum wage increase without the laws being enacted, because one obviously has to perform the experiment before they can see results or collect data. What can be done, is observing states that have increased their state level minimum wage which is just minimum wage laws that apply exclusively in that state. Around twenty-three states in The United States of America have minimum wage laws noticeably higher than what the federal law constitutes. Washington State and the District of Columbia have some of the highest minimum wage rates in the nation with Washington States being eleven dollars an hour and D.C.’s (District of Columbia) being ten dollars and fifty cents an hour and is scheduled to climb even more in the coming years. People in the media and advocates for massive minimum wage have claimed that these are victories for getting people out of poverty.

 The claim is not being made that there is a direct correlation between minimum wage rates and poverty, but these two places are well above the national unemployment rate of four point six percent with Washington State at five point two percent and the District of Columbia at five point four percent (Bureau of Labor Statistics, 2015). Just like it is predicted in many of these arguments, these high minimum wage rates are doing damage to the lower skilled workers who are the ones that make up impoverished workforce that the minimum wage is supposed to help. Both of these areas also rank amongst the top states for youth unemployment along with California and Hawaii which are also states with minimum wages significantly higher than that of the federal minimum wage.

Most people will tend to shrug off the statistics about youth unemployment saying that employed teenagers’ lives are less dependent on the wages they earn to stay out of poverty because they assume that youth employees are all students being mostly funded by their parents. I would argue that point by saying it is essential that that employment opportunities are just as available to younger workers as they are to adults, because learning a skill or trade is vital to young workers figuring out the types of jobs they want to pursue in their adult lives.

 I personally worked several minimum wage, entry level jobs in my teen years (which I am currently still in), and if we ignore the knowledge and skill that was gained in those jobs, I was still provided with valuable experience and practice with learning the ins and outs of being an employee. Those experiences are important to every young employee that wants to pursue a lifelong career in whatever field they choose. If minimum wages were to increase and youth employment go down, we then have a problem of a generation of young workers coming out of college or into the work force with no job experience because employers were forced to look for more qualified workers to fill those jobs with new higher wages. This is a similar scenario to the model of a higher minimum wage hollowing out a metropolitan economy in that we have a continuous downward spiral of an economy, with this being a cycle of young workers having less and less job experience and therefore being able to find entry level jobs less and less often.

Something that must be constantly reiterated is how little effect that federal, as well as state minimum wage increases have on poverty rates, which is the number one target of for minimum wage increase advocates. One recent academic study found that both state and federal minimum wage increases between 2003 and 2007 had no effect on state poverty rates (Wilson, 2012). This is a fact stated in Mark Wilson’s 2012 study about the negative side effects of minimum wage laws. Having an increase in the wage simply a short sighted, impulsive want for low wage laborers. What is behind these opinions are a lot of somewhat socialist mindsets of “I am here, and I am breathing; therefore, I deserve” (Shapiro, 2016). The problem with these arguments is that there is no evidence out there that simply raising what business owners are required to pay workers will decrease the poverty rate. The cost of living would simply go up, which would put these people back in the same position they were to start with. I currently work at the Chick-Fil-A in Five Points in Columbia, South Carolina. South Carolina is one of the states that has minimum wage laws that are the same as what the federal minimum wage laws are; $7.25 an hour. This is the wage I work for, and if the federal government decided that I should make nine dollars an hour or fifteen dollars an hour, you the consumer would then be paying seven dollars, or eleven dollars for your chicken sandwich. It is easy to hear that food costs, and the cost of living would go up and sort of wave that fact to the side, because you do not see the actual numbers for things you buy on a daily basis. Imagine minimum wage is raised, and every student living on campus, or dependent on their parents now has to deal with six hundred dollars a month in rent, now is at eight hundred dollars a month. If minimum wage is increased, will wages for other jobs go up as well? If so, which jobs? Unless we want to discourage people from going to college, or getting graduate degrees because they are entitled to high wages anyway, wages for other jobs would also have to up, which would just put the economy in the same position it is in now, but with more inflation.

Another large reason to not support minimum wage increases is that increasing the wage will make many small business owners unable to pay their workers. In some areas of politics and economics, there is a myth out there that all business owners in America are swimming in money each night, but the fact of the matter is that there is a reason that these businesses are classified as small. Because these businesses are not geographically dispersed, have less capitol, and mobility, these small will not be able to adjust to increased wages that they will have to pay their workers without significantly raising the prices on all of their goods, which could cause them to go out of business because all of their customers are driven to the big box stores.

 According to the United States Census Bureau and Bureau of Labor Statistics, there were about 27.9 million small business in America as of 2010. If the minimum wage is raised, then we risk losing these businesses along with those 56.8 million people that would be out of work. With certain areas of the country being more reliant on small businesses and more densely populated by them, certain regions in the U.S. could suffer economically with all these businesses potentially shutting down in the wake of a minimum wage increase.

One of the other great points made by Ben Shapiro is that people have to realize that significantly raising the federal minimum wage will not create some form of trickle up economics which is a term not often used, but still described by many advocates to raise minimum wage (2016). A main argument is that the more people are paid, the more money that they will spend which is all but true. The common argument here is that when these workers are paid more, and subsequently spend more, then that is more money than before now circulating through the economy which causes growth. The reality of this situation is that pumping more printed money from the bottom rung of the economy is not going to cause growth. Economics in the simplest form is trading for a good or service, and growth comes from those who manufacture the good or service. Putting more money into a local economy can support growth, but growth cannot be achieved unless new goods and services are offered. And even then, all of the prices have gone up anyway because of the minimum wage increase, so raising a minimum wage actually will not be able to cause growth. In the best case scenario, businesses are only able to maintain what they currently do. 

The main goal of raising the minimum wage is to eliminate poverty as much as possible in America right? Making the lowest wage earners able to afford access to more resources in the economy for education and gaining experience. Many researches have actually concluded certain studies by saying a raise in the minimum wage could lift lots of people in the U.S. out of poverty. Arindrajit Dube’s published research on minimum wage effects across state boarders shows that a raise in wages to $10.10 an hour could lift about 4.6 million people out of poverty.

 There is also a good chance that slow gradual raises could be adjusted to by the economy much better than most people think. A $10.10 minimum wage would also raise the GDP (Gross Domestic Product) by $22.10 billion dollars. This jump could support the creation of eighty-five thousand new jobs in America as outlined by Bryce Covert in her Think Progress article about the large domestic advantages that come with raising the minimum wage. There has even been a large study put out by John Schmitt from the Center for Economic and Policy Research that explains that for most firms across America, the business expenses other than the wages of the lowest paid worker’s dwarf what they spend on their minimum wage employees, so a slight raise in the federal minimum wage would not be too big a problem for businesses to accommodate for.

Something that people could think about when regarding this argument is a wage increasing method that does not require a federal minimum wage increase. One of these alternatives to raising federal minimum wage is a large cutback in government subsidies that are often used to supplement low skilled workers, or employees that work lower wage jobs. What will happen, is the government will save money that would normally have to be distributed to businesses in the form of food stamps, and other methods of compensation for low wages. What the result ends up being, is that big box stores are put on a level playing field with other businesses and will be forced to compete for labor. Often it is the much larger businesses that receive more support from the government in the form of subsidies in exchange for large corporations backing certain political parties. Once the government in less involved in these businesses, and they have to compete more for labor in the form of their wages with other businesses, we will see the economy much more capable of righting itself. So the argument here is not to see people be paid seven dollars and twenty-five cents for the rest of their lives, but if we make raising wages the responsibility of businesses in order to compete with each other instead of the government simply forcing them to pay more while keeping these large subsidies in the big businesses, wages will go up but in a much more responsible and self-maintaining way. Because once wages are raised to compete with other business owners, companies will not be able to raise all of their prices nearly as easily without losing business. So here we have debated the pros and cons of raising the federal minimum wage. After all of the debating is done, this is still a very scrutinized topic that effects the lives of millions of Americans, and we may never truly come to a rock solution for this issue. My proposed solution for this argument would be to leave the minimum wage where it is now, and instead focus on job education, and encouraging people to better themselves as much as possible to compete in this market. What will make this economy grow more than any federal wage increase is people putting themselves into the work force to better it, because new products are being devised every day. There can never be to many ideas in a free market economy, so let us put in the work to better ourselves rather than talk about inflation rates and what is fair. The importance this topic has is at a mass more critical than ever, and hopefully some of these logistics can be applied to other situations. 
