Top Pro & Con Arguments
Raising the minimum wage would increase housing and consumer goods costs for everyone and greatly disadvantage minimum wage workers.
In a study of minimum wage raises from 2000 to 2009, researchers found that three months after a raise, housing rents increased. Lucas Hall, founder of Landlordology.com, explains, “Raising the minimum wage causes a temporary spike in spending power… [but l]andlords raise rents as tenants are willing and able to pay more.” As a result after “rents went up in response to the increase in income, people still had some additional income compared to before. But it wasn’t as big of a surplus as people would like to think raising the minimum wage leads to,” according to Brent Ambrose, Jason and Julie Borrelli Faculty Chair in Real Estate at Pennsylvania State University.
Plus that small surplus may end up covering the increased costs of everyday items instead of going into a savings account or paying for additional education. James Sherk, Research Fellow in Labor Economics at the Heritage Foundation, argues, “Most minimum-wage employees work for small firms in competitive markets. These companies have small profit margins. They can only pay higher wages if they raise prices. Customers—not business owners—pay that cost.” For example, NBC News found that the price of a cup of coffee went up by 10 to 20% in Oakland, California, after a 36% minimum wage hike, while coffee prices in Chicago rose 6.7% after the minimum wage rose to $10.
Raising the minimum wage could decrease employee benefits and increase tax payments, further costing the employees. According to James Sherk, MA, Senior Policy Analyst at the Heritage Foundation, a single mother working full time and earning the federal minimum wage of $7.25 an hour would be over $260 a month worse off if the minimum wage were raised to $10.10: “While her market income rises by $494, she loses $71 in EITC [earned income tax credit] refunds, pays $37 more in payroll taxes and $45 more in state income taxes. She also loses $88 in food stamp benefits and $528 in child-care subsidies.”
Raising the minimum wage also creates more jobs for more skilled workers, disadvantaging teenagers, young adults, and those with less education and experience. If employers have to pay an employee more, they will expect the employee to have a more experienced skill set, essentially removing the job from the tier of jobs available to minimum wage workers.
This dynamic also makes it more difficult for minimum wage workers to gain upward mobility. Don Boudreaux, Adjunct Scholar at the Cato Institute, explains, “the minimum wage cuts off the first rung of the employment ladder, and it’s that first lowest paying rung that provides the skills and experience workers need to reach the next rung and to continue climbing their way to a better life.” Increasing minimum wage decreases entry-level jobs that are the “route to the top” of the job ladder.Read More