In the United States, the minimum wage is the starting wage that some employers pay employees. The current federal minimum wage is $7.25. This means that — in most cases — employers cannot pay less than $7.25, regardless of an employee’s experience or status.
Historically, minimum wage workers are disproportionately women and people of color. Earning minimum wage can make it difficult for those living in debt or poverty to get out of their situation, especially if they experience financial hardship or emergency medical bills. This presents a case for raising the minimum wage — so that low-income earners stand a chance to earn more and reduce their overall debt.
On the other hand, raising the minimum wage presents issues for businesses, especially small business owners. When profits are low, it can be difficult to hire the staff necessary to keep the business running. Big corporations don’t have to worry about an increase in the minimum wage as much, but it’s still a concern.
Whether you are a business owner, the Chief Financial Officer of a major corporation, or an employee, this guide will explain the pros and cons of raising the minimum wage to $15.
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Why a $15 Minimum Wage?
The nation’s current minimum wage is actually lower than it was in the 1960s. Inflation has caused the minimum wage to lose 9.6% of its purchasing power.
Some legislators want to raise the minimum wage to $15 an hour to mainly keep up with inflation. In order to afford the rising costs of goods and services, the minimum wage must be increased. This is especially true when it comes to those who are underpaid, including women and minorities.
Raise the Wage Act
Passed in July 2019, the Raise the Wage Act seeks to raise the minimum wage gradually to $15 by 2025. Up until that point, the minimum wage hadn’t been raised in the United States since 2009. The government is tasked with monitoring how any increases affect the economy as well as employment rates.
On the one hand, this increase to $15 could be beneficial to many low-income workers, allowing them to be able to afford more as inflation causes prices of goods and services to rise. On the other hand, some companies may be unable to offer this new minimum wage and therefore limit the number of jobs available overall.
Pros of $15 Minimum Wage
Below are some of the pros that raising the minimum wage to $15 could provide.
- Raising the standard of living: With low-income earners generating more money, they will have more purchasing power and will be able to adopt a higher standard of living, raising the standard of living overall.
- Keeping up with inflation: The current minimum wage makes it difficult for many workers to stay above the poverty level. Raising the minimum wage to $15 would allow these workers to keep up with the rising costs of goods and services.
- Increase in household cash flow: The more money people have to spend, the more they are going to put back into the economy, creating demand and ultimately, more jobs.
- Could help reduce income inequality: According to data from a UC Berkeley economist, despite gains for both the top 10% and bottom 90% of earners, “Income inequality remains extremely high. For example, the top 10% income share is 50.5% in 2018, extremely close to its highest point of 50.6% in 2017.” Raising the minimum wage to $15 could help combat this, considering the current minimum wage is what creates that inequality.
- Less government social programs: Many low-income earners participate in government assistance to survive. With an increase in the minimum wage, those earners wouldn’t need to rely on programs such as Medicaid and Supplemental Nutrition Assistance Program (SNAP) as much.
- More government revenue from taxes: With a $15 minimum wage, the government would also be earning more in taxes. This means more money for improvements in the economy.
Cons of $15 Minimum Wage
Below are some of the cons of raising the minimum wage to $15:
- Layoffs for companies: For some companies, especially small businesses, this gradual increase might make it difficult to pay their staff. Therefore, this increase could cause those companies to have to layoff some of their team in order to stay operational.
- Hiring fewer workers: An increase in the minimum wage could mean fewer jobs in the economy overall for those companies who can’t afford to pay the new minimum.
- Motivation for employers to make investments on updated technology: To cut back on the costs of hiring human laborers, many companies could turn to automated systems to get the job done, seeing the one-time cost as being more practical than the annual pay an employee would require.
- Increase in outsourcing labor: Similar to automated systems, companies who can’t afford to pay U.S. employees the new minimum wage may outsource labor to countries where the minimum wage is more affordable.
- Increase in prices: To combat the rising cost of manpower, many companies may increase the price of their goods and services to be able to afford quality talent.
- Salary increases could be lower: Salaried workers — or those not directly impacted by the minimum wage — could experience limited opportunities for raises with an increase in the minimum wage.
States Considering the Higher Minimum Wage
Currently, in the United States, the states with the highest minimum wage are:
|District of Columbia||$14.00|
Some states have higher minimum wages than the federal minimum wage, as seen above. The following states seek to reach the new $15 minimum wage by the following dates:
- Connecticut in 2023.
- Illinois in 2025.
- New Jersey in 2024 for most workers.
- Maryland in 2025.
- Massachusetts in 2023.
- New York — The minimum wage is currently $15 for large employers.
- California in 2022 for large employers; 2023 for small employers.
There are pros and cons to raising the minimum wage to $15, but many states have already started adopting this practice. How it affects you will be determined by your current financial status, where you live, and ultimately, where you are employed.
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