The Debate of Minimum Wage

  Since first being passed in 1938, minimum wage has been at the center of many debates.  Currently, the federal minimum wage is $7.25, a number many believe needs to be increased. 

   Over 21 states have increased their minimum wage, but there have been no public plans for a federal increase. Despite this, it is estimated that two thirds of America favor $15 per hour as a set minimum wage.

   In February of 2019, Governor Phil Murphy of New Jersey signed a bill that will increase minimum wage by $1 every subsequent January 1st until reaching $15 in 2024. 

   The first increase took place on January 1st, 2020 as wages increased to $11 an hour. Murphy’s bill followed many other states as Democratic lawmakers have long favored a federal minimum wage boost.

   The bill immediately received support while others raised opposition. With minimum wage continuing to increase in increments many questions were raised. What will happen to small businesses? How will minimum wage impact the economy?

   Mrs. Lowery, a business teacher, said she believes an increase in minimum wage “will help people get people out of poverty, it will allow people to no longer work two jobs, therefore it might help some people lower the costs of their childcare.” Raising the minimum wage ensures low-wage workers the ability to keep a standard of living with the cost of goods and services rising.

   Others argue that increasing the wage will boost economic activity due to higher income and ultimately driving consumer spending. 

   In contrast, others believe it is not an effective tool to reduce poverty or income inequality. One of the biggest questions is whether minimum wage will drive inflation.

   Raising the minimum wage could place pressure on inflation, but continuing to increase wages to remain at pace with inflation will reduce the effects.

  Those in opposition to the increase in wages assert that stress is placed on the unemployment system. Higher wages create tighter budgets which may cause employers to begin laying off their staff. 

  Small businesses will see the biggest impact with increases in minimum wage. Mr. Murphy, a business owner and economics teacher, described small businesses’ profits facing pressure due to costs rising, possible layoffs, and businesses will try to increase prices.

   Mrs. Lowery asserts that “small business owners are the ones that generally employ at minimum wage because that’s what they can afford. They might have to let those people go.”

 “The reality is that there is a good chance the price levels will rise faster than nominal wage causing the real wages to decline,” Mr. Murphy states, meaning. businesses will absorb the new costs and put them on consumers through higher prices. 

   Another worry that has risen with wage increases is the idea that many young-adults and teenagers will find themselves shut out of the workforce. Businesses will find themselves hesitant to hire younger, less experienced workers. 

   Chelsea Fanz, a senior who works at a local clothing store, said “It’s hard enough trying to find a job as I’m graduating in June, but the fact that minimum wage is going up has made it more difficult. I see people’s hours getting cut and businesses trying to keep a smaller staff so they can stay afloat.”

   There may even be a shift towards more technology run businesses, with self-checkout and computer ordering already replacing service employees.

   Mr. Murphy said, “Businesses will move to a more kiosk, less labor dependent business model,” with stores such as Sam’s Club and McDonalds already moving towards technology.

   Minimum wage impacts everyone, so it is expected to face opposition in light of its support. With each year more states are passing legislation to increase the set wage.

   Mr. Murphy said “Even if the law has good intentions the markets will be forced to react and more times than not those laws wind up hurting those it was intended to help.” It has been seen throughout the past that government interference in the markets can lead to unexpected consequences. 

   When asked whether she supported the increase, Mrs. Lowery said “Personally I do … It’s not a flat jump from $8 to $15, they are doing it in a period of a couple years. I think that was a good idea from Governor Phil Murphy.”