The institution of a $15 national minimum wage has long been popular among progressives. President Biden has previously promised to increase it, and it is now a heated point of debate between Republicans and Democrats: Republicans stand firmly against bumping the minimum wage while Democrats favor the idea. Will increasing the national minimum wage really help the lower class and effectively combat wage inequality?
Democrats argue that raising the minimum wage would increase economic activity and raise job growth. The idea is that by raising the wages, the GDP would increase, thus resulting in a cycle of increased private investment and more jobs. There is also the argument that the minimum wage has not kept up with inflation, as some say is evident in its reduced purchasing power. This argument makes sense when we realize the minimum wage has not been increased since July 24, 2009, standing at a whopping $7.25. The third argument Democrats make is that raising the minimum wage will reduce income inequality because the lowest earners of society would now be making significantly more money. Multiple economists argue that while jobs would most likely not increase with a minimum wage hike, inequality would be reduced.
On the other side of the aisle, Republicans insist that increasing the minimum wage would force businesses to lay off employees and raise unemployment levels. The reasoning behind this is that many small businesses operate with thin margins with payroll usually being the largest expense. If businesses are forced to pay people more, owners have no choice but to lay off some of their employees to pay the other’s wages. Bernie Sanders, Democrat senator for Vermont and long-time proponent of a $15 minimum wage, gave himself a basic microeconomics lesson while running for president. In his presidential campaign, he paid his workers $15 an hour. To account for this pay increase, he had to cut back his employees’ hours, resulting in them making about the same amount of money for less work, which did not improve productivity. Republicans also argue that a higher minimum wage would increase the price of consumer goods. Now that businesses have to pay their employees more, they have to charge more for their products and services so they can maintain the same margins. The third argument focuses similarly on the concept of prices going up; a minimum wage hike would not reduce income inequality because other people’s wages would increase in response. Consider this for a moment: If a fast-food worker now makes $15 an hour, wouldn’t that mean a more highly skilled job would have their wage increased to account for the new minimum? A major tenet of the Republican argument is that a $15 minimum wage will not grant the buying power of $15 to low wage workers; rather we will see a spike in inflation that will keep minimum wage workers where they are. Another point is that a national minimum wage does not account for the varied cost of living throughout our country. $15 per hour in New York City is of much more value than in a state like Mississippi with the lowest cost of living, where $15 borders on being excessive as a minimum.
The debate over how much the minimum wage ought to be really boils down to how each side of the aisle views its purpose. Democrats see the minimum wage as something that could be a “living wage.” Republicans interpret it exactly as it is named: a minimum hourly rate for low-skill jobs by which students and part-time workers can be protected from wage slavery. With Democrats having control of the White House and both branches of Congress, it is likely this policy will be put into effect. Let’s see how it turns out.
Thanks for reading,
Brian Inguanti
