Minimum Wage Hike

Paul Navis

The Raise the Wage Act is currently an act in Congress put forth by Democrats to increase the minimum wage to $15 by 2025. While many Americans, particularly those earning minimum wage, want it to increase, it is important to understand all of the economic impacts.

The minimum wage is found necessary by people for many reasons. According to the Economic Policy Institute, 21% of the workforce would be improved by the wage increase, including 59% of workers below the poverty line.. This increase would be around 3,300 a year in total. With American’s earning more, they are more likely to spend more leading to a stimulated economy. This stimulation of the economy would be incredibly beneficial and would definitely help everyone have a livable wage.

Another major impact of a minimum wage hike would be the amount that it would help minorities. Nearly a third of African Americans and nearly a quarter of Latinx and Hispanicslatino’s would benefit from a minimum wage increase. Not only would this help minorities but it would also help women. Over half of Americans affected by the minimum wage increase would be women between the ages of 25 and 54.

One concern with increasing the minimum wage is a potential decrease in employment. According to the American  Experiment, employment is based on the market-clearing rate, which determines how many workers they need to get the max amount of profit. This means that businesses could end up laying off more workers. According to American Experiment, 72 percent of U.S. economists do not support a minimum wage hike to $15. These economists believe this will negatively impact younger workers most with employers looking for better-qualified workers. This means that younger people will have 

Another Minimum Wage concern is a potential increase in prices. While large businesses might not see a large change or feel much of an impact. Small businesses will be hit by the pandemic and according to Forbes, “The local neighborhood stores and businesses with razor-thin profits will be forced to raise prices to make up for the additional labor costs.  This increase in prices means those earning over the minimum wage have a harder time affording certain items leading to a lower cost of living. This increase in salary could be partially negated by an increase in your cost of living.

Economist J.M. Ian Salas states “the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage.” The minimum wage ultimately includes both positive and negative changes that will affect the economy that lawmakers need to keep in mind.