The problem with raising the minimum wage

April 6th, 2016


A minimum wage in the United States was established in 1938 at $0.25 per hour. When adjusted for inflation, this would be $4.23. The minimum wage now has increased substantially to $7.25. In California, the plan is to raise the minimum wage to $15 by the year 2022. The has been talk of doing the same in other states, such as New York.


America is not the only country to be drawn into the appeals of a higher minimum wage. This Friday, the minimum wage in Great Britain will be raised to 7.20 pounds per hour. This would exchange to $10.36.


Many debate whether or not this is necessary. My personal stance is over whether or not this is economically healthy. Depending on who you may ask, you may receive very skewed answers. For uneducated teenagers working at the mall, this is awesome. For those who are already retired, it doesn’t make much difference. However, for all of the rest of the people in between those two age groups, there are various shades of good and bad.


It is not surprising to many folks in tune with the United States’ economy that the country is looking for a little inflation. Raising the minimum wage across the country could, however, create more inflation than the country is ready for.


When workers are paid more, corporations must charge more for their products and services in order to recover the money they lost to higher wages. So although Americans may have more money in their wallets and bank accounts, if the prices of all commodities has risen by the same amount, the country isn’t necessarily any wealthier.


It is hard to say how a minimum wage of $15 would specifically affect the economy because there has never been a minimum wage that high before. An instantaneous raise may shock the system, which is why government officials have opted for a slower plan of attack.


Much like the Federal Open Market Committee’s plan to slowly and incrementally raise interest rates, California will be raising the minimum wage a little at a time. Although this a good way to safeguard the success of this plan, it still worries me deeply.


Higher wages and unemployment have a direct positive relationship. This means that as the minimum wage for workers is raised, unemployment will rise. Workers will be laid off in attempts to offset the cost of labor. Whether or not this occurs at a considerable rate is certainly something that economist should be watching and prepared for.


Lifting the minimum wage raises many people out of poverty, but throws some others a tough break. Personally, it is hard to justify helping some at the expense of others. Is any one alternative better than the other?


I anxiously await to see the effects of the raised wages on California’s economy. Should this prove useful, I predict that it would make it much easier for other states to do the same.


Should the whole country join in, I feel as though we may be entering into a new situation that we have no prior data on.