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Increasing the Federal Minimum Wage: A Lifesaver or a Killer?

By: Jaclyn Crittenden

Blog Category: Minimum Wage & the Economy

A hot topic in politics today is forcing the middle class to think about a subject that we generally only focus on during election season-raising the minimum wage. While we may not think about it often, low-income employees think about it nearly everyday. According to Obama in his State of the Union address, 19 states and Washington DC currently have minimum wages set above $7.25 per hour, but this blog entry focuses only on the federal minimum wage and its effects on the job market.

More than 30 million full-time workers earn the national minimum wage of $7.25 per hour, making $15,080 a year. That’s just below the federal poverty threshold of $15,130 for a family of 2. As many low-income earners have children to support and are often single-parent households with one adult working, resources are even scarcer than what data can measure.

I spent 10 years before law school working retail for $7.25 an hour and serving tables for $2.23 per hour plus tips, so I have observed the struggle experienced by my co-workers. Luckily, I had my Mom to support me. Now, as a law student who has learned about politics, policy, and economics, I am aware that increasing the minimum wage will have a ripple effect on the economy as a whole. This blog entry does not seek to advocate for or against an increase of minimum wage. Instead, this entry is meant to help readers consider both sides of the debate on the Fair Minimum Wage Act of 2013.

Advocates for an increased minimum wage argue that the extra earnings for the lowest-paid workers would allow families to afford the basic necessities, raise many struggling households above the federal poverty line, and increase economic activity.  It’s estimated that raising the minimum wage to $9.00 an hour, as proposed by the Fair Minimum Wage Act of 2013, would generate between $21 billion-$32 billion for the economy and create between 120,000- 140,000 new jobs. Indexing the minimum wage to inflation, as the proposed legislation also entails, would prevent more families from falling into poverty as costs of living increases over time.

According to opponents of a minimum wage increase, this debate is a question of more-skilled low-wage workers versus less-skilled low-wage workers. Better-educated workers with better skills benefit from the wage increase at the expense of their less-educated, less-skilled counterparts with shorter work histories. Raising the minimum wage increases the cost of labor, rather than increasing the value of labor. As with all things in the marketplace, the more something costs, the less of it is bought; this is as true of workers in the labor market as it is of anything else.

In the meantime, the future for many low paid employees and their families, whether bright or gloomy, hangs in the balance while the Fair Minimum Wage Act of 2013 is hotly debated.

The opinions expressed herein are strictly those of the author and do not necessarily reflect the opinions of the Widener Journal of Law, Economics & Race. 

Sources:

Antony Davies, James R. Harrington, Raising the Minimum Wage is No Free Lunch, U.S. News Opinion (October 21, 2013), http://www.usnews.com/opinion/blogs/economic-intelligence/2013/10/21/raising-the-minimum-wage-kills-jobs-for-low-skill-workers.

Obama Minimum Wage Plan Renews Economic Debate, News 2 WCBD-TV Charleston http://www.counton2.com/story/21236121/obama-minimum-wage-plan-renews-economic-debate (last updated Feb. 25, 2013 6:22 PM).

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