The minimum wage is $7.25 an hour and it has not been raised since 2009. In the same period incomes of the top 1% have risen by 11.2%% according to a study by economist Emmanuel Saez. When adjusted for inflation, the minimum wage today buys less than in 1968. Had the minimum wage kept pace with inflation, it would be over $10 an hour today.
The disparity between the incomes of the top 1% and the bottom 99% is growing exponentially. One reason is that the minimum wage, are not keeping pace with inflation. This disparity is hurting the economy since it stifles consumerism because fewer customers have money to buy goods and services from American businesses.
President Obama says it is wrong for a person to work full time and still live in poverty. He asked Congress to raise the minimum wage to $9.00 an hour—a modest increase considering it would still be less in real terms than in 1968. Immediately Congressional Republicans made it clear they will vigorously oppose the president’s proposal.
Opponents of increasing the minimum wage often rely on scare tactics, lies, and misconceptions to justify their opposition. Facts, on the other hand, debunk their arguments.
Here are five facts about the minimum wage that prove that raising it is not only the right thing to do, it would be good for the economy.
Increasing minimum wage does not result in fewer jobs
Jobs are scarce and no one wants to cause them to become scarcer. Therefore a charge that raising the minimum wage will cause unemployment is effective. It is also untrue.
There have been over 64 studies of the effect of the minimum wage on employment between 1972 and 2007. What they show is that there is virtually no correlation between increases in the minimum wage and levels of employment in lower paying jobs.
Researchers found “the large negative elasticities in the traditional specification are generated primarily by regional and local differences in employment trends that are unrelated to minimum wage policies.”
So, data proves that raising minimum wage does not kill employment even for low-paying jobs.
Higher minimum wage actually creates new jobs
Raising the minimum wage may increase demand for goods and services and bolster consumer spending, offsetting the increase to employer costs. One study estimates “that an increase in the minimum-wage from its current level of $7.25 per hour to $9.80 per hour by July 2014 would increase the earnings low-wage workers by about $40 billion over the period” and creates some 100,000 jobs.
Higher minimum wage does not drastically increase prices
Opponents of raising the minimum wage say it will raise prices and that will hurt the poor. Data disproves that. A comprehensive review of more than 30 academic papers on the price effects of the minimum wage found that a 10% US minimum wage increase raises food prices by no more than 4% and overall prices by no more than 0.4%. If wages go up 10% and prices 0.4%–that is a net gain in buying power for the poor, not a reduction.
Higher minimum wage leads to greater productivity for businesses
Studies show that when the minimum wage is raised, employers demand more productivity from their employees in exchange for the higher wages. A review of 81 fast-food restaurants in Georgia and Alabama found that “90% of managers indicated that they planned to respond to the minimum-wage increase with increased performance standards
In addition, higher wages reduces turnover thus reducing the re-training costs for businesses. One study found “striking evidence that separations, new hires, and turnover rates for teens and restaurant workers fall substantially following a minimum wage increase. These all make business more profitable.
Low minimum wage kills incentives for work
The president is correct. It is morally for a person to work full time and still live in poverty. This kills the incentive for work. The government should be doing everything it can to make sure everyone has a job, and every job has a living wage. Keeping minimum wage low is the wrong policy. It destroys the incentive for work and increases the need for dependency that Republicans deplore. To end dependency, increase the minimum wage.
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