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Last Updated: March 12, 2021

Minimum Wage: Should Congress Raise the Federal Minimum Wage?



Introduction

SUPPORTERS ARGUE

Raising the federal minimum wage would alleviate poverty by putting more money into the hands of workers who struggle to afford basic necessities like housing and food. A higher minimum wage would lower unemployment, invigorate the economy, mitigate income inequality, and reduce dependence on welfare. Hard-working Americans deserve a living wage.

OPPONENTS ARGUE

Raising the federal minimum wage would strain businesses and reduce job opportunities for low-skilled workers without significantly reducing poverty. If forced to pay workers more than their labor is worth, businesses will hire fewer employees and automate jobs, eradicating entry-level opportunities. Employers cannot afford a higher federal minimum wage.




Paul Hennessy/NurPhoto via Getty Images

An Amazon worker processes a package at a fulfillment center in Orlando, Florida, in April 2019. In 2018, Amazon raised its lowest hourly wage to $15 an hour for all employees regardless of location.

On November 3, 2020, nearly 61 percent of Florida voters approved a ballot measure to gradually increase the state's minimum wage from $8.56 to $15.00 per hour by 2026. The vote made Florida the eighth state in the country, and the first state in the South, to approve a $15 minimum wage. That day, Americans also elected former vice president Joe Biden (D)—who has advocated increasing the federal minimum wage, which has been set at $7.25 since 2009, to $15 an hour—to the White House. President Biden has stipulated that the government must implement such a change gradually to give employers time to adjust. "No one should work 40 hours a week and live in poverty," he said at a CNN town hall meeting in February 2021, about a month after taking office. "But it's totally legitimate for small business owners to be concerned."

The minimum wage—the lowest hourly rate at which most employers can legally pay their workers—is intended to protect workers from labor exploitation. The minimum wage has long been a contentious and politically fraught issue. Labor advocates often urge legislators to raise it, while business interests often fight such increases. Some conservatives, who view the minimum wage as an unwelcome government intrusion into the free market, protest the very existence of a government-mandated minimum wage. Many liberals, on the other hand, consider it crucial to alleviating poverty, fostering healthy working and middle classes, and improving the quality of life for the lowest-earning laborers in the United States.

In 2019, the U.S. Bureau of Labor Statistics reported that about 1.6 million workers—or less than 2 percent of all hourly workers—earned the federal minimum wage of $7.25 per hour or less in 2019. The biggest proportion of minimum-wage workers—about 37 percent—work in leisure and hospitality, and many more minimum-wage jobs are in the retail, education, health, and public sectors. Black workers, young workers, and female workers are disproportionately represented among those who earn the minimum wage. The law exempts certain types of employees, such as restaurant servers or other tipped workers, provided they make at least the minimum wage with tips and their lower hourly wage combined.

Based on a 40-hour workweek, a minimum-wage worker earns about $15,000 a year, just slightly above the federal poverty level of $12,760 for one person. To stay above the federal poverty guideline of $16,910 for a two-person household, however, a worker would have to make above the minimum wage, or at least about $8.13, to keep the household out of poverty. Though the share of the American workforce who earn the minimum wage or less is quite small, many more Americans earn less than $15 an hour. A $15 minimum wage, the Economic Policy Institute (EPI), a think tank, estimates, would give a raise to about 32 million Americans, or about 21 percent of the U.S. workforce.

Most economists agree that the federal minimum wage has not kept pace with increases in the cost of living, worker productivity, or median wages. Worker productivity rose by nearly 70 percent from 1979 to 2018, the EPI estimates, while the minimum wage only increased about 11.6 percent during the same time period. Had the minimum wage kept pace with these increases, it would be at about $20 an hour already. The difference between the minimum wage and median wages earned by American workers, meanwhile, has widened, aggravating income inequality in the country. Wages in general have not kept pace with increases in housing, food, education, and other basic living expenses. "Today, in all areas across the United States, a single adult without children needs at least $31,200—what a full-time worker making $15 an hour earns annually—to achieve a modest but adequate standard of living," the EPI, which supports a $15 minimum wage, stated in a fact sheet in January 2021. "By 2025, workers in these areas and those with children will need even more."

As of March 2021, only five states—Alabama, Louisiana, Mississippi, South Carolina, and Tennessee—had not adopted their own minimum wages. Twenty-nine states had a minimum wage higher than the federal minimum wage, and eight states—California, Connecticut, Florida, Illinois, Maryland, Massachusetts, New Jersey, and New York—and several cities have approved legislation immediately or gradually raising the rate to $15 an hour. Many Democrats argue that it is far past time for Congress to follow suit and increase the financial security of the lowest-paid workers in the United States. Many Republicans, however, assert that the cost of living in many states and rural areas is simply not high enough to justify such a dramatic increase, and requiring all employers to pay $15 an hour, they insist, would force businesses to shutter, eliminate entry-level jobs, or replace employees with machines, all of which would hurt unskilled workers (or workers who lack college degrees or specialized professional training) across the country.

Should Congress raise the federal minimum wage?

Supporters argue that increasing the federal minimum wage benefits all Americans because it puts more cash in the hands of workers who are likely to spend it, spurring economic activity and growth. A higher federal minimum wage, they contend, reduces poverty, income inequality, and reliance on welfare and other government assistance programs. Americans who work full-time should not struggle to afford basic food and housing costs, they assert, and workers deserve the dignity a livable wage will provide them.

Opponents, on the other hand, argue that the minimum wage distorts the labor market while doing little to alleviate poverty. By forcing employers to pay workers more than their labor is worth, they contend, a higher minimum wage would compel businesses to reduce their labor forces or automate some positions, making it harder for workers with fewer skills to find jobs. The cost of living varies wildly across the United States, they note, and Congress should let local and state governments set their own minimum wages.

The History of the Minimum Wage

In the late 19th century, new technology spurred the rapid growth of manufacturing in the United States and other industrializing countries around the world. Workers in these countries often toiled in harsh, dangerous, and overcrowded factories, conditions that spurred workers to push for safer working conditions, shorter working days, better pay, and the right to organize into labor unions. In the 1890s, Australia and New Zealand became the first countries to enact national minimum-wage laws, and labor activists in the United States soon called for similar policies. [See Unions and Labor Law]

Leaders within the Catholic Church were among the most vocal early proponents of a minimum wage in the United States. In 1906, Catholic priest John Ryan published A Living Wage: Its Ethical and Economic Aspects, which argued that every person has a God-given right to a "decent livelihood." The government, Ryan wrote, "has both the right and the duty to compel all employers to pay a Living Wage" capable of providing "as far as practicable the conditions of wider and fuller life."

Much of the early debate over the minimum wage focused on female workers. Many men found the notion of the government setting a minimum rate for which they could work offensive but believed that women—whom they deemed more vulnerable to exploitation and less capable of negotiating a fair rate of pay—required a minimum wage and other protections. In 1903, Oregon enacted legislation limiting the number of hours a woman could work to 10 hours per day. Employers challenged the law, but the U.S. Supreme Court upheld it in 1908 in Muller v. Oregon. "In the struggle for subsistence," Justice David Brewer wrote, a woman "is not an equal competitor to her brother…. [S]he is properly placed in a class by herself, and legislation designed for her protection may be sustained, even when like legislation is not necessary for men and could not be sustained." [See Muller v. Oregon, U.S. Supreme Court Decision (primary source)]

The ruling—in addition to the influence of a growing workers' rights movement—sparked similar labor laws across the country. In 1912, citing the rationale used in the Muller decision, Massachusetts enacted a minimum-wage law for women and children, the first such law in the United States. In 1918, Congress established a minimum wage for women and children who worked in the nation's capital. By 1923, minimum-wage laws for women and children were in force in 16 states, Puerto Rico, and Washington, D.C.

Except for Muller, however, the Supreme Court had taken a decisively conservative turn by the time the push for a minimum wage was gaining traction in state legislatures. Throughout the 30-year period known as the Lochner era—named after Lochner v. New York (1905), in which the Court overturned a New York law limiting the hours a baker could work in a week—the Court issued numerous decisions that frustrated legislative attempts to strengthen government oversight of working conditions. [See Lochner v. New York, U.S. Supreme Court Decision (primary source)]

This trend extended to the minimum wage. In 1923, the Children's Hospital of the District of Columbia challenged Washington, D.C.'s minimum-wage law. In Adkins v. Children's Hospital, the Supreme Court struck down the law, ruling that it violated the Fifth Amendment to the U.S. Constitution, which guarantees that "no person shall…be deprived of life, liberty, or due process of law." By passing a minimum wage, the Court held, Congress had denied workers and employers the right to freely negotiate contracts without government interference. The ruling slowed momentum toward establishing a minimum wage. "Social-justice advocates regarded the decision as a major blow," journalist Conor Friedersdorf wrote in the Atlantic in 2013. "In ensuing years, it would frustrate at least a dozen state legislatures and multiple presidents…. It would also be hailed by its defenders as a sensible defense of individual liberty in employment." Many states repealed or revised their minimum-wage statutes in response to Adkins, but persistent attempts to enforce similar laws sparked later Supreme Court rulings. [See Adkins v. Children's Hospital, U.S. Supreme Court Decision (primary source)]

New York Times Co./Hulton Archive/Getty Images

Workers protest layoffs amid the Great Depression in New York City in 1937.

The debate over the minimum wage intensified during the Great Depression, a severe economic slump that lasted throughout the 1930s. President Franklin D. Roosevelt (D, 1933–45) promoted a set of social programs, collectively known as the New Deal, to help lift the country out of the depression. As support for laws to combat poverty, protect workers' rights, and regulate industry increased among a working class increasingly struggling to make ends meet, the push for minimum-wage laws gained momentum.

The Supreme Court, however, again struck down the minimum wage as unconstitutional in Morehead v. New York ex rel. Tipaldo in 1936. The Court sided with Brooklyn laundromat owner Joseph Tipaldo, who had made his employees repay him the difference after a New York statute required him to increase their wages. Echoing its decision in Adkins, the Court ruled that the law violated the right of individuals—particularly employers and employees—to freely form contracts without government intervention. The Morehead decision proved to be the catalyst for a series of events that ultimately ended the Lochner era. The ruling was "among the most unpopular ever rendered by the Supreme Court," historian Jonathan Grossman wrote in an account of the minimum wage on the U.S. Department of Labor website. "Even bitter foes of President Roosevelt and the New Deal criticized the Court." [See Morehead v. New York ex rel. Tipaldo, U.S. Supreme Court Decision (primary source)]

Indeed, in the aftermath of the Morehead ruling, President Roosevelt proposed a plan to expand the number of justices on the Supreme Court from 9 to 15 so that he could appoint liberal judges who would uphold New Deal and state regulatory measures. The plan met with widespread opposition, but in 1937, Supreme Court justice Owen Roberts changed his vote at the last minute in West Coast Hotel v. Parrish to uphold a minimum-wage law in Washington State. The move, known as "the switch in time that saved nine," marked the end of the Lochner era and the beginning of the Court's acceptance of pro–New Deal and pro-labor legislation, including minimum-wage laws. [See West Coast Hotel v. Parrish, U.S. Supreme Court Decision (primary source)]

By that time, support for a national minimum-wage law was growing. "All but the hopeless reactionary will agree that to conserve our primary resource of manpower," President Roosevelt asserted several months after the decision in West Coast Hotel, "government must have some control over maximum hours, minimum wages, the evil of child labor, and the exploitation of unorganized labor." In 1938, Congress passed the Fair Labor Standards Act (FLSA), which set a national minimum wage of 25 cents per hour. The law established a 44-hour workweek, required employers to pay employees who labored more than eight hours a day higher overtime wages, and imposed strict regulations on child labor.

The initial federal minimum wage included various exemptions, such as for service employees whose main source of income was tips. Other workers, including farm laborers and domestic servants, were also exempt from minimum-wage requirements, though many of these were added in subsequent amendments to the FLSA. In 1949, for example, Congress extended the minimum wage to transportation workers, and in 1961 to retail workers. By 1975, more than 90 percent of the American workforce was covered by the minimum wage. The federal minimum-wage law still provides a much lower minimum wage for employees who earn tips (as long as the amount received in tips covers the shortfall), young workers who have recently started a job, and workers with disabilities whose productivity is reduced relative to other workers. (For example, if a disabled worker can complete half as many tasks as a fully abled worker in the same period of time, the disabled worker can be paid $3.63 per hour, or half of the federal minimum wage.) The federal minimum wage also does not cover prison labor or various positions that are generally associated with young workers, such as newspaper delivery, "casual" babysitting, and non-trained companionship for the elderly, though some states have laws protecting workers in these jobs.

Congress has periodically increased the national minimum wage to keep pace with inflation, when the rise in the cost of goods and services outpaces the purchasing power of a currency. In 1939, legislators raised the federal minimum wage from 25 cents to 30 cents per hour, and in 1945 to 40 cents. In 1950, it rose to 75 cents, in 1956 to $1.00, and in 1963 to $1.25. By 1976, the minimum wage was $2.30, and in 1991, it rose to $4.25. In 1997, Congress increased the minimum wage to $5.15, where it remained for 10 years. In 2007, Congress passed the Fair Minimum Wage Act, which incrementally raised the minimum wage over the next two years, reaching $7.25 in 2009.

Economists Study Impact of Minimum Wage as Cities and States Outpace Congress in Hiking Pay

For decades, economists have studied and debated the impact of the minimum wage on economic growth, unemployment, and standards of living. In 1977, Congress established the Minimum Wage Study Commission to analyze the effects of the minimum wage on employment. The commission's report, released four years later, stated that "it is not clear whether one should expect the minimum wage to reduce adult employment, and if it does, the amount may be so small that it will not be detected with precision." The report also found, however, that a 10 percent increase in the minimum wage could be expected to decrease teenage employment by 1 to 3 percent.

Economists also engaged in more localized studies. In 1994, labor economists David Card and Alan Krueger compared the rates of employment in New Jersey's fast-food industry before and after a statewide increase in the minimum wage. The study found minimal impact on employment, though it found some evidence that restaurant chains had passed a fraction of the higher employment costs on to consumers through higher food prices. "The weight of this evidence," Card and Krueger wrote in their 1995 book Myth and Measurement: The New Economics of Minimum Wage, "suggests that it is very unlikely that the minimum wage has a large, negative employment effect."

Other experts, however, have disputed such interpretations of the data. In 2006, economists David Neumark and William Wascher published an aggregate review of more than 100 studies on the impact of the minimum wage. The "traditional view that the minimum wage reduces the employment of low-wage workers," they concluded, was accurate.

A more recent study, released in September 2019 by the Federal Reserve Bank of New York, compared wage and employment data from border counties along the New York–Pennsylvania border. While Pennsylvania had not increased its minimum wage above the federally mandated $7.25 an hour, New York had implemented gradual increases since 2014. Researchers found that wage increases in New York had no adverse effects on employment rates in the hospitality, leisure, and retail industries. Many economists caution that it is difficult to reach clear conclusions on the impact of minimum-wage laws on employment because the presence of many other variables—like the rate of economic growth or the birth or decline of various industries—is nearly impossible to account for.

Economists have also studied to what extent businesses that can afford to do so will choose to automate jobs—replace workers with machines that perform the same labor—rather than pay higher wages. A study published in 2017 by the National Bureau of Economic Research, a nonprofit research organization, analyzed data from 1980 to 2015, finding that minimum-wage increases spurred automation in certain industries. "[W]e find that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers, and increases the likelihood that low-skilled workers in automatable jobs become nonemployed or employed in worse jobs," economists Grace Lordan and David Neumark wrote. "The findings imply that groups often ignored in the minimum wage literature are in fact quite vulnerable to employment changes and job loss because of automation following a minimum wage increase."

In addition to divining the effect the minimum wage has on employment, economists and policy makers have also studied what type of workers such statutes affect. Many of the workers who occupy the lowest-paying, hourly positions have traditionally been teenagers and other young people who do not yet have a family to support. In the late 20th century, however, the manufacturing industry, which had provided millions of Americans with some of the most well-paying, secure jobs available to workers without college degrees, began to decline as many companies outsourced production to countries where the cost of labor was cheaper and operations less regulated.

As a result, many older Americans who in a former era would have worked in manufacturing often turned to the kind of hourly retail or service jobs traditionally thought of as entry-level employment for young Americans. The rise of the gig economy—in which, in the absence of full-paid, secure employment, many Americans have turned to juggling several part-time jobs, such as freelancing or driving for Uber—has further complicated data surrounding the minimum wage. Still, it is clear that many of the workers who earn the minimum wage are relatively young. According to U.S. Bureau of Labor Statistics, about 40 percent of all hourly workers earning the federal minimum wage or less in 2019 were under the age of 25. Because many Americans of all ages make more than the federal minimum wage but less than $15 an hour, however, more than doubling the minimum wage, as Democrats suggest, would benefit workers in all age groups. The Economic Policy Institute estimates that more than 90 percent of the workers who would benefit from a $15 minimum wage are over the age of 20. [See Bureau of Labor Statistics Reports on Characteristics of Minimum Wage Workers (primary source)]

Numerous cities and states, meanwhile, have raised their minimum wages well above the national level. In 2012, fast-food workers in New York City organized a protest in support of a $15 minimum wage. The movement spread quickly, with workers in various industries demonstrating in favor of higher wages. "What started in one city ultimately swelled to protests in 150 American cities," New York Times reporter Steven Greenhouse wrote in 2016. "By many measures, it has become the biggest labor protest in decades, with a wide spectrum of supporters, from college students and inner-city workers to janitors and nursing-home aides." In 2014, the cities of Seattle, Washington, and San Francisco, California, adopted plans to phase in a $15 minimum wage. In 2016, Los Angeles, California, the second-largest city in the United States, adopted a plan to phase in a $15 minimum wage by 2020, and in 2020, New York City, the largest city in the country, and Washington, D.C., both enacted a $15 minimum wage.

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Workers in New York City protest for a higher minimum wage in April 2015.

Several states have followed suit. In April 2016, California governor Jerry Brown (D) and New York governor Andrew Cuomo (D) both signed laws gradually phasing in a $15 minimum wage in their states. In 2018, Massachusetts enacted a law raising the hourly minimum wage to $15 by 2023. Connecticut, Illinois, Maryland, and New Jersey enacted similar laws the following year, and in November 2020, Florida voters approved a measure to gradually raise the state's minimum wage to $15.

As of early 2021, 29 states and Washington, D.C., have higher minimum wages than the federal requirement of $7.25. Only five states—Alabama, Louisiana, Mississippi, South Carolina, and Tennessee—have not adopted their own minimum-wage laws. Some states have also eliminated certain exceptions to the minimum wage. In 2002, for example, Vermont became the first state to abolish a subminimum wage for workers with disabilities, overriding the exception built into the federal minimum wage; other states, including Alaska, Maryland, and New Hampshire, followed suit.

As a result of these changes, the Economic Policy Institute has found, by 2026 about 40 percent of American workers will live in areas covered by a $15 minimum wage. For the remaining 60 percent of the workforce, labor activists have called for federal implementation of a $15 hourly minimum. In July 2019, the U.S. House of Representatives passed a bill to raise the federal minimum wage to $15 by 2025; however, the Republican-controlled U.S. Senate refused to vote on the bill.

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Senator Bernie Sanders (Independent and Democratic Socialist, Vermont) introduces the Raise the Wage Act, which would increase the federal minimum wage to $15 an hour by mid-2025, in January 2019. He introduced the bill again in January 2021.

As policy makers debated changing the law, some businesses took voluntary steps to increase pay for their workers. In October 2018, for example, Amazon announced that its entire workforce—which would surpass 1 million employees within two years—would earn a minimum of $15 per hour, regardless of location. In December 2020, Starbucks announced wage hikes that brought 30 percent of its staff up to $15 per hour, with a plan to bump all workers up to $15 per hour within three years. In February 2021, Walmart, the country's largest private employer, announced plans to increase pay for much of its workforce to $13 to $19 an hour, depending on location, and Costco announced it would institute a $16 minimum wage for all employees.

In January 2021, President Joe Biden (D)—who supports increasing the federal minimum wage—took office and Democrats claimed a narrow majority in the Senate, increasing the likelihood that a minimum-wage hike could make its way through Congress. That month, Senator Bernie Sanders (Independent and Democratic Socialist, Vermont) and 37 co-sponsors introduced the Raise the Wage Act of 2021, which would phase in a $15 federal minimum wage by 2025, as well as phase out subminimum wages for tipped workers and workers with disabilities.

In February 2021, the Congressional Budget Office (CBO), a nonpartisan federal agency that provides budget-related information and projections, published a report analyzing the potential effects of the bill. Raising the hourly minimum to $15 would boost earnings for about 17 million workers and lift approximately 900,000 Americans out of poverty, the CBO report found, but it would also lead to the loss of approximately 1.4 million jobs. The CBO analysis also found that the hike, by triggering a rise in the price of goods and services and swelling the amount the government spent on unemployment benefits, would increase the government's budget deficit by $54 billion by 2031. [See Congressional Budget Office Analyzes Impact of $15 Federal Minimum Wage (primary source)]

Some liberal think tanks have criticized the methodology the CBO used and emphasize that if Congress raises the minimum wage the U.S. government could see significant savings in welfare and other programs. The Economic Policy Institute, for instance, estimates that a $15 minimum wage would save the U.S. government between $13.4 and $31.0 billion every year in public assistance programs that provide food stamps and other aid to low-wage Americans. The think tank's analysis also found that the Raise the Wage Act could help reduce racial wealth inequality by providing a raise to about 31 percent of Black workers and 26 percent of Latino workers. About 60 percent of those who would see a pay increase under the proposed bill, furthermore, were women, who historically have earned lower wages than men.

Supporters Argue: Congress Should Raise the Federal Minimum Wage

Supporters of raising the federal minimum wage argue that anything less than $15 an hour is simply too low for anyone in the United States to live on. "No person in America can make it on $8, $10, or $12 an hour," Senator Sanders said in February 2021 after introducing the Raise the Wage Act.

In the United States of America a job must lift workers out of poverty, not keep them in it. We must raise the minimum wage to a living wage—at least $15 an hour. And when we do that, not only will we be lifting millions of Americans out of poverty, we will be providing a raise to over 33 million workers. We can no longer tolerate millions of workers not being able to afford to feed their families or pay the rent.

The federal minimum wage has stagnated at $7.25 an hour for more than 10 years while the cost of childcare, food, housing, and other necessities has continued to rise, advocates contend, sinking the lowest-paid workers in the country further into poverty and debt. "The decade since the $7.25 minimum wage took effect is the longest period without an increase in history," columnist Katrina vanden Heuvel wrote in the Washington Post in July 2019. "In that time, workers earning minimum wage have seen their purchasing power decline by 17 percent, and they now bring home nearly one-third less in today's dollars than they did a half-century ago."

The failure of the minimum wage to keep pace with either the cost of living or improved worker efficiency, proponents assert, means that Americans are working harder than ever with diminishing returns. "This decline in purchasing power means low-wage workers have to work longer hours now just to achieve the standard of living that was considered the bare minimum half a century ago," David Cooper, a senior analyst at the Economic Policy Institute, wrote in February 2019.

Since the 1960s, the United States has achieved tremendous improvements in labor productivity that could have allowed workers at all pay levels to enjoy a significantly improved quality of life. Instead, because of policymakers' failure to preserve this basic labor standard, a parent who is the sole breadwinner for her family and who is earning the minimum wage today does not earn enough through full-time work to bring her family above the federal poverty line.

Raising the minimum wage, advocates contend, causes job losses less than critics suggest. "Most economists say that modest minimum wage increases have not hurt employment," Anna Godøy and Michael Reich, economists at the Center on Wage and Employment Dynamics, a research center at the University of California at Berkeley, wrote for CNN Business in July 2019. "[H]igher minimum wages do not have adverse effects on employment, or the weeks or hours worked among minimum wage workers—even four years after minimum wages are increased…. [T]he United States can raise pay to $15 an hour by 2024 without hurting jobs, even in low-wage states."

Increasing the minimum wage stimulates consumption, supporters claim, which in turn spurs economic growth. "During my nearly 20 years in business, I've learned a key lesson: When people make more money, they spend more money, and that's good for business," Ashraf Hijaz, owner of a beauty supply chain in Alabama, wrote in the Montgomery Advertiser in July 2020. "The entire country would benefit from a higher minimum wage. It should be part of a long-term solution to promote the shared recovery of businesses and communities and strengthen our economy."

Raising the minimum wage benefits not only workers, advocates argue, but also employers. "When businesses invest more in their employees, employees become more invested in the business," Holly Sklar, chief executive officer of Business for a Fair Minimum Wage, an organization that favors a higher minimum wage, wrote in the Clarion-Ledger in 2018. "Low pay typically means high turnover. With reduced turnover, businesses see substantial savings in recruiting and training costs. They see less product waste, lower error and accident rates, increased product quality and better customer service."

A higher minimum wage, proponents assert, would be one of the most effective means of reducing the persistent wealth gap between white Americans and Black, Hispanic, and Native Americans, who are disproportionately employed in low-wage sectors. "Making the minimum wage a living wage…would go a long way in making the lives of people of color materially better," Ellora Derenoncourt and Clair Montialoux, economists at the University of California at Berkeley, wrote in the New York Times in October 2020. "If America's contemporary leaders are serious about reducing racial inequality, they must push for simple, bold measures, such as doubling the federal minimum wage." 

An increase in the federal minimum wage to $15, advocates contend, could substantially improve the quality of life for millions of Americans, providing them much-needed financial support and diminishing the need to work multiple jobs. "I know that anything under $15 means a constant scramble for families," Carrie Mack, a nursing assistant in Michigan, wrote in the Lansing State Journal in July 2019. "A higher wage would spare families like mine from that kind of uncertainty and stress. There'd be no extra shifts, side hustles or nights without dinner. Instead, we'd have a baseline level of security that everyone deserves."

That security, supporters argue, would make a gigantic and wide-ranging difference in people's lives. "A $15 minimum wage is an antidepressant," Matthew Desmond, a professor of sociology at Princeton University, wrote in the New York Times in February 2019.

It is a sleep aid. A diet. A stress reliever…. Poverty can be unrelenting, shame-inducing and exhausting. When people live so close to the bone, a small setback can quickly spiral into a major trauma. Being a few days behind on the rent can trigger a hefty late fee, which can lead to an eviction and homelessness. An unpaid traffic ticket can lead to a suspended license, which can cause people to lose their only means of transportation to work. In the same way, modest wage increases have a profound impact on people's well-being and happiness. 

Opponents Argue: Congress Should Not Raise the Minimum Wage to $15 an Hour

Opponents of raising the minimum wage argue that requiring companies to pay workers more than their labor is worth will force employers to fire large numbers of people and leave them with no income at all. The Congressional Budget Office "says increasing the current $7.25 minimum wage [to $15.00] could fatten the wallets of 17 million workers," columnist Jay Ambrose wrote in the Columbus Dispatch in July 2019. "That sounds great except that, maybe for 1.3 million others, it could bring their paychecks to zero…. [B]usinesses would have to come up with the extra money one way or the other, an obvious means being to lay people off, usually the less skilled sometimes replaceable by technology."

A company that might be willing to give a chance to a young or inexperienced employee who needs training at a low wage, critics contend, is much less likely to give that employee a chance at a high minimum wage. "Let's suppose there's a teenager whom you as an employer would be perfectly willing to hire for a dollar fifty an hour," Nobel Prize–winning economist Milton Friedman said in an interview in 1973, when the minimum wage was $1.60. "But the law says no, it's illegal for you to hire him at a dollar fifty an hour. You must hire him at a dollar sixty. Now, if you hire him at a dollar sixty, you're really engaging in an act of charity.… That's something few employers, quite naturally, are willing to do or can afford to do without being put out of business by less generous competitors."

Indeed, opponents assert, businesses forced to pay workers a higher minimum wage will find alternative ways to cut back or replace workers, including by investing in machines to do their jobs. "With government driving up the cost of labor, it's driving down the number of jobs." Andy Puzder, CEO of a restaurant company that includes Carl's Jr. and Hardee's, told Business Insider in 2016, "You're going to see automation not just in airports and grocery stores, but in restaurants."

While some large companies and corporations can shoulder the costs of a higher minimum wage, many small businesses lack the resources to do so, critics contend, and will suffer unfairly if the minimum wage is increased. "It will raise prices for those who can afford it the least," Jarrett Skorup, director of marketing and communications at the Mackinac Center for Public Policy, a think tank, wrote in the Hill in January 2021.

Big businesses and high-end restaurants often support higher minimum wages. That may seem odd at first, but it makes sense when you consider their competitive environment. Big corporate firms can more easily absorb these mandated costs and can invest in new technologies that make them less dependent on human labor. The same cannot be said of the small businesses competing with these firms, so big businesses ultimately can benefit when governments raise costs.

Increasing the minimum wage does little to reduce poverty, opponents maintain, because it affects only a limited number of workers, few of whom are their families' main breadwinners. "Many proponents of raising the minimum wage think it helps poor people, but, overall, it doesn't," Skorup wrote.

Most people who earn low wages aren't living in poverty—in fact, most live in families earning more than the average U.S. income. That's because most are the second (or third or fourth) income earners in a family, not the primary one. Most people who live in poverty don't work at all, and only 10 percent of adults in poor households work full time…. A hike in the minimum wage won't help those in poverty; in fact, it is likely to make it harder for them to find a job, the real ticket out of poverty.

Fighting poverty is a laudable aim, critics of raising the minimum wage contend, but one that the government, not private industry, should pursue. Creative and targeted tax policies, they claim, would be fairer and more effective than burdening businesses. "Earning subsidies, like the earned-income tax credit [a tax credit for low- and middle-income working families], are a better way to lift low-income workers out of poverty in part because they are financed with tax revenue," Michael Strain, director of the American Enterprise Institute, a think tank, wrote in Bloomberg in January 2021. "They use resources from all of society—not just low-wage employers and their customers—to achieve a social goal."

Minimum-wage jobs are often entry-level positions where workers gain valuable training, opponents argue, and if these positions disappear because employers can't afford wage hikes it will be the poor and unskilled who suffer most. "The value of a minimum wage job isn't primarily the money—it's the experience and skills gained, the stepping stone to the next job, that's the real value," Skorup wrote. "Raising the minimum wage limits the availability of these types of jobs, which means fewer people will get the opportunity to learn these important skills. This mostly harms low-skilled individuals and low-income households, the very people most in need of new employment opportunities."

Some critics acknowledge that the minimum wage should be raised slightly, but doubling it to $15 nationwide is too drastic, they contend, and does not account for wide variations in the cost of living in different parts of the country. Dramatically increasing the minimum wage in relatively low-income areas, they argue, could upend the labor market and destroy regional economies. "Puerto Rico, where a $15 minimum wage, if applied, would equal 150 percent of the current median wage, according to Bureau of Labor Statistics data, could be devastated," a Washington Post editorial stated in 2019. "The federal minimum wage is, indeed, overdue for an update…. The smart way to do that, however, is by pegging it to local conditions and then having it automatically grow with inflation going forward—no politics needed."

Raising the minimum wage, opponents argue, will prevent employers from investing and training their employees in ways that will help advance their careers. "[T]he only way to achieve actual wage increases—that is, lasting wage increases that don't take jobs and incomes from others—is for workers to become more productive," Rachel Greszler, a research fellow in economics at the Heritage Foundation, wrote in the Chicago Tribune in January 2021. "To that end, government mandates are powerless. A $15 minimum wage won't help workers gain education and experience or to provide them with technology that will enable them to produce more value and earn larger incomes. In fact, it could cause the opposite, by shifting employers' resources away from training and investments to wages instead."

Future of $15 Federal Minimum Wage Uncertain

Some economists have proposed that, if Congress does increase the federal minimum wage from $7.25 to $15.00 an hour, it should impose a safety valve so that, in times of recession or other challenges, the government can temporarily lower it so businesses are not forced out of operation. Others have proposed indexing the minimum wage to inflation so that it automatically keeps pace with the rising cost of living and Congress does not have to return to the issue every few years. Legislators will continue to debate the wisdom of more than doubling the national minimum wage, but regardless of federal action, a growing number of states and cities will likely keep revising their own minimum-wage laws to improve compensation for the lowest paid workers in the United States.

Bibliography

Ambrose, Jay. "Democrats' Rush to Raise Minimum Wage Will Backfire." Columbus Dispatch, July 13, 2019, www.dispatch.com.

Bram, Jason, Fatih Karahan, and Brendan Moore. "Minimum Wage Impacts Along the New York–Pennsylvania Border." Liberty Street Economics, September 25, 2019, libertystreeteconomics.newyorkfed.org.

Cassidy, John. "The Case for a Higher Minimum Wage." New Yorker, February 14, 2013, www.newyorker.com.

"Characteristics of Minimum Wage Workers, 2019." U.S. Bureau of Labor Statistics, April 2020, www.bls.gov.

Derenoncourt, Ellora, and Claire Montialoux. "To Reduce Racial Inequality, Raise the Minimum Wage." New York Times, October 25, 2020, www.nytimes.com.

Desmond, Matthew. "Dollars on the Margins." New York Times, February 2, 2021, www.nytimes.com.

"The Effects on Employment and Family Income of Increasing the Federal Minimum Wage." Congressional Budget Office, July 2019, www.cbo.gov.

Elis, Niv. "Starbucks Set to Raise Wages, Bringing 30 Percent of Employees Above $15 Minimum Wage." The Hill, December 10, 2020, www.thehill.com.

Fitzpatrick, Laura. "The Minimum Wage." Time, July 24, 2009, www.time.com.

Friedersdorf, Conor. "The Epic, Surprisingly Sexist Fight that Brought the Minimum Wage to America." Atlantic, February 18, 2013, www.theatlantic.com.

Godøy, Anna, and Michael Reich. "The US Can Raise the Minimum Wage to $15 Without Hurting Jobs." CNN Business, July 11, 2019, www.cnn.com.

Greenhouse, Steven. "How the $15 Minimum Wage Went from Laughable to Viable." New York Times, April 1, 2016, www.nytimes.com.

Greszler, Rachel. "A $15 Federal Minimum Wage Would Be an Anchor on Struggling Businesses." Chicago Tribune, January 22, 2021, www.chicagotribune.com.

Grossman, Jonathan. "Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage." U.S. Department of Labor, Accessed April 26, 2013, www.dol.gov.

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Jackson, Kerry. "Driving Up Labor Costs Drives Down Jobs." Orange County Register, June 10, 2016, www.ocregister.com.

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Wilson, Mark. "The Negative Effects of Minimum Wage Laws." Cato Institute, September 2012, www.cato.org.

Additional Sources

Additional information about the minimum wage can be found in the following sources:

Card, David, and Alan B. Krueger. Myth and Measurement: The New Economics of the Minimum Wage. Twentieth-Anniversary Edition, Princeton, N.J.: Princeton University Press, 2016.

Ehrenreich, Barbara. Nickel and Dimed: On (Not) Getting By in America. New York: Henry Holt, 2001.

Neumark, David, and William Wascher. Minimum Wages. Cambridge, Mass.: MIT Press, 2008.

Sandbu, Martin. The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All. Princeton, N.J.: Princeton University Press, 2020.

Contact Information

Information on how to contact organizations that either are mentioned in the discussion of the minimum wage or can provide additional information on the subject is listed below:

Economic Policy Institute
1225 Eye St. N.W.
Suite 600
Washington, D.C. 20005
Phone: (202) 775-8810
Internet: www.epi.org

Heritage Foundation
214 Massachusetts Ave. N.E.
Washington, D.C. 20002
Phone: (202) 546-4400
Internet: www.heritage.org

National Bureau of Economic Research
1050 Massachusetts Ave.
Cambridge, Mass. 02138
Phone: (617) 868-3900
Internet: www.nber.org

Keywords

For further information about the ongoing debate over the minimum wage, search for the following words and terms in electronic databases and other publications:

Automation
Cost-of-living increase
Labor movement
Living wage
Poverty
Unemployment